Jerome Powell warns there’s ‘no risk-free path’ to avoid stagflation: ‘We have a situation where we have two-sided risk’

Group 1 - The Federal Reserve is facing significant challenges in managing the U.S. economy amid persistent inflation and slowing growth, with Chair Jerome Powell stating there is "no risk-free path" ahead [1][2] - The Federal Open Market Committee (FOMC) announced its first interest rate cut in nine months, reducing the federal funds rate by a quarter-point to a range of 4.0% to 4.25%, while acknowledging elevated uncertainty in the economic outlook [2][4] - Key indicators suggest the emergence of stagflation, with consumer prices rising by 0.4% in August, leading to an annual inflation rate of 2.9%, and initial unemployment claims reaching their highest level in four years at approximately 263,000 [3][4] Group 2 - Job growth has slowed significantly, averaging only 35,000 per month over the last quarter, down from 168,000 per month in 2024, while unemployment has increased to 4.3%, indicating a deteriorating labor market [3][4] - The Fed's projections indicate inflation is above target, and growth forecasts for the year have been lowered from 1.7% to 1.4%, highlighting the challenges faced by policymakers [4] - Powell's comments reflect the delicate balance the Fed must maintain, as aggressive rate cuts could reignite inflation, while maintaining high rates risks further economic slowdown [5]