Fed Chair Powell: Downside risks to employment have risen as the balance of risks have shifted

Economic Overview - The Federal Open Market Committee (FOMC) has decided to lower the policy interest rate by a quarter percentage point due to rising downside risks to employment and elevated inflation levels [2][10] - GDP growth has moderated, with a rise of approximately 1.5% in the first half of the year, down from 2.5% the previous year, primarily due to a slowdown in consumer spending [3][4] - Business investment in equipment and intangibles has increased, while the housing sector remains weak [4] Labor Market Insights - The unemployment rate increased to 4.3% in August, with payroll job gains slowing to an average of 29,000 per month over the past three months [5][6] - Labor demand has softened, and the recent pace of job creation is below the break-even rate needed to maintain the unemployment rate [6][7] - Wage growth continues to moderate but still outpaces inflation, indicating unusual market conditions in both labor supply and demand [6] Inflation Trends - Total Personal Consumption Expenditures (PCE) prices rose by 2.7% over the 12 months ending in August, with core PCE prices increasing by 2.9% [8] - Near-term inflation expectations have risen due to tariffs, although longer-term expectations remain aligned with the 2% inflation goal [9] - The median projection for total PCE inflation is 3.0% for this year, decreasing to 2.6% in 2026 and 2.1% in 2027 [9] Monetary Policy Direction - The FOMC aims to balance its dual mandate of maximum employment and stable prices, adjusting the federal funds rate target range to 4% to 4.25% [10][15] - The appropriate level of the federal funds rate is projected to be 3.6% at the end of this year, lower than previous projections [15] - The committee remains committed to supporting maximum employment and achieving a sustainable inflation rate of 2% [16]