Catenaa, Thursday, September 18, 2025- The US Federal Reserve Chair said that there are no risk-free paths as the Fed struggles between maximizing employment and having a neutral monetary policy.
“There are no risk-free paths now,” said Chair Jerome Powell at the press conference on Wednesday. “It is quite a difficult situation for policymakers.”
In prior policy decisions, when the Fed confronted the threat of looming tariffs and persistent inflation, the balance of risks was clearly tilted towards keeping prices stable.
But lower levels of job creation and higher unemployment warranted a change in policy as the risks between inflation and a weakened job market have meaningfully shifted, Powell said. And thus, the Fed began its move away from its moderately restrictive stance.
It is, as Powell clarified, “quite an unusual situation” for the Fed’s two goals to be in tension. But he clarified that the framework is clear and requires the Fed to ask itself “how far is each from the goal and how long is it expected to get to the goal” when deciding what to do.
But that framework has little to say about what to do, only how to weigh the goals, and the potential to execute a misstep is growing.
Fed policymakers envision more easing to come. The median estimate from all Fed officials is that there will be two more rate cuts this year, up from a prior estimate released in June, as the labor market deteriorates.
Wednesday’s decision came with a sole dissenter. Newly confirmed Fed governor Stephen Miran preferred an even larger cut of a half a percentage point.
