Federal Reserve Chair Jerome Powell said Tuesday that the U.S. central bank is performing a delicate balancing act as it seeks to contain inflation without derailing the labor market. Speaking at an event hosted by the National Association for Business Economics, Powell emphasized that “there is no risk-free path for policy” as the Federal Reserve navigates competing goals of stable prices and strong employment.
The remarks come as the Trump administration’s sweeping trade, immigration, and fiscal policies continue to complicate the Fed’s outlook. A combination of rising tariffs, slowing job growth, and limited access to official data due to the ongoing federal government shutdown has left policymakers with few clear signals about the direction of the economy.
Economic Crosswinds from Trump’s Policies
Powell’s comments reflect the increasingly complex environment confronting the central bank. Under President Donald Trump, the introduction of aggressive tariffs has pushed up prices for many goods, according to recent Commerce Department data. In September, a survey by the National Federation of Independent Business showed that more small firms are planning to raise prices in the months ahead.
At the same time, the labor market — long a pillar of the post-pandemic recovery — is showing signs of strain. Job growth has slowed sharply, unemployment durations are lengthening, and for the first time in years, there are more unemployed workers than available job openings. These dynamics have raised concerns that the Fed’s efforts to bring inflation under control could tip the economy into a broader slowdown.
Data Gaps and Policy Uncertainty
The ongoing federal government shutdown has suspended the publication of key economic indicators such as employment reports and inflation data, depriving the Fed of critical information used to assess the state of the economy. Powell acknowledged the challenge, saying the central bank is relying on “a wide variety of public- and private-sector data” as well as direct feedback from business contacts across the country.
“Based on the data that we do have, it is fair to say that the outlook for employment and inflation does not appear to have changed much since our September meeting four weeks ago,” Powell said, signaling that the Fed is likely to maintain its cautious approach in upcoming policy decisions.
Rate Policy and Internal Divisions
The Federal Reserve cut borrowing costs for the first time this year in September, citing slowing economic momentum and uncertainty around inflation trends. However, Powell warned against acting too aggressively: “If we move too quickly with lowering rates, we may leave the inflation job unfinished,” he said. “If we move too slowly, there may be unnecessary losses — painful losses — in the employment market.”
The path forward is complicated by internal divisions within the Federal Open Market Committee. Trump-appointed Fed governors Michelle Bowman and Christopher Waller dissented in July, favoring a deeper rate cut, marking the first time multiple governors opposed a policy decision since 1993. In September, Fed Governor Stephen Miran — a close Trump ally who was sworn in just hours before the meeting — pushed for an even larger half-point reduction.
“We have a healthy debate going,” Powell said, attempting to downplay the rare public disagreements within the Fed. The split reflects a deeper philosophical divide between policymakers focused on inflation control and those prioritizing labor market stability amid growing political and economic turbulence.
As the Federal Reserve grapples with an uncertain economic landscape shaped by tariffs, political volatility, and incomplete data, Powell’s message was clear: every policy choice carries risks. With inflation pressures persisting and job growth slowing, the Fed’s next moves will be critical in determining whether the U.S. can achieve a soft landing — or slide into a more severe downturn. For now, Powell and his colleagues appear committed to steady, data-dependent policymaking amid one of the most challenging environments the central bank has faced in decades.