Jerome Powell: US Fed ‘doesn’t want’ labour market to soften, calls today's cut ‘risk management’

US Fed Chair Jerome Powell

United States Federal Reserve Chair Jerome Powell framed Wednesday’s quarter-point policy move as a “risk management cut,” highlighting a cooling labour market and softer growth. “While the unemployment rate remains low, it has edged up. Job gains have slowed and downside risks to employment have risen,” he said, adding that labour demand has softened and that the recent pace of job creation “appears to be running below the breakeven rate needed to hold the unemployment rate constant.”

For context, earlier the Fed lowered the federal funds rate by 25 basis points to 4.00–4.25 percent and signalled two further quarter-point reductions this year — three cuts in 2025 in total, up from two pencilled in June — with additional moves projected in 2026 and 2027.

Powell said the simultaneous slowing in both the supply of and demand for workers was “unusual,” noting that weaker immigration and participation have curbed labour supply. He added: “The labour market is softening and we don’t need it to soften anymore (and) don’t want it to,” citing rising unemployment among minorities as a concern.

On growth, Powell said GDP rose at about 1.5 percent in the first half of the year, down from 2.5 percent last year, with the moderation “largely” reflecting weaker consumer spending. He described the Fed’s approach as balancing risks: “You can think of this, in a way, as a risk management cut.”

Markets at a glance: Wall Street’s reaction was muted, with much of the decision priced in. The Dow Jones Industrial Average rose 0.5 percent (about 260 points), while the S&P 500 was little changed and the Nasdaq slipped 0.2 percent. Bond yields moved higher, with the 10-year at 4.05 percent and the 2-year at 3.52 percent, while the dollar edged up.