To take away: if you are confused about the next step for the American economy, the Fed also

Washington
–

On Wednesday, the federal reserve has dropped interest rates for the first time since December to support the defaulting labor market in America. However, the path of the economy to follow seems to be troubled, according to the leader of the central bank.

The Fed has reduced its reference loan rate by a quarter of a point to a new range of 4% to 4.25%. This is the first drop in the rate of President Donald Trump’s second mandate, following a nine -month break caused by uncertainty surrounding the main changes in administration policy.

But the future of the economy remains in the air, said the president of the Fed, Jerome Powell, to journalists at a press conference after the conclusion of the Fed monetary policy meeting. “It’s not incredibly obvious what to do,” he said.

However, the Fed has progressed with a “risk management cut” because Powell characterized it because central bankers cannot wait forever that Trump’s policies become clear.

“We have to live life by looking through the windshield rather than in the rear view mirror,” said Powell.

The last decision of the Fed was not unanimous: the governor of the Fed, Stephen Miran, a named against Trump under assessment just before the start of the Fed meeting on Tuesday, dissident, supporting a lower rate and a half.

The Fed officials were in pencil in a drop in additional rate later in the year, according to their economic projections updated, compared to the two cups in 2025, according to them, in June. This would mean that the Fed could deliver another quarter -point reduction at its October meeting, then another in December.

However, their projections for unemployment and inflation this year were unchanged from their June estimates.

Here are some points to remember from the last decision of the Fed and the Powell press conference.

Powell on the job market and inflation

Powell clearly indicated that the growing risks for the labor market were one of the main reasons why the Fed finally lowered the rates, even if there is also a risk that Trump prices push prices.

The head of the Fed qualified the labor market as one of the “low shots and weak shots”.

Powell highlighted high unemployment among young people due to the low -hiring environment today. The Fed noted in its policy declaration that “the risks of drop for employment have increased”.

“The concern is that if you are starting to see the layoffs, there will not be much job in progress,” said Powell.

American central bankers remain in a difficult situation, with both sides of their double mandate – stable prices and maximum – threatened employment.

The inflation of goods exposed to prices, such as furniture and devices, has started to climb in recent months, according to economic data. Powell said the impact of prices prices did not have a “very big effect at this stage”, but that the complete extent of these effects remains to be seen.

But in the end, it was the future of the labor market that was in the lead for Fed officials.

“There is really a risk of significant decrease” for the labor market, said Powell. “But let’s remember that there is an unemployment rate by 4.3% and that the economy increases to 1.5%, so it is not a bad economy.”

Powell suggested that the Fed is not behind the curve, since Wednesday’s decision works as an insurance policy to defend itself against future weakness on the labor market.

Powell on Miran and Fed Independence

The Fed’s latest decision was essential, but the elephant in the room was Trump’s aggressive efforts to reshape the best ranks in the central bank.

The first question that Powell was asked concerned the arrival of Miran to the Fed, in particular if his arrangement to serve as governor of the Fed while remaining an employee of the White House means anything for the independence of the Fed.

“So we have welcomed a new member of the committee today and, as we are still doing, the committee remains united in pursuit of our double mandate objectives,” said Powell. “We are strongly determined to maintain our independence and beyond, I really have nothing to share.”

As the Fed officials affirm to a complicated economic puzzle, the powerful board of directors of the Central Bank has experienced unprecedented developments in recent months. The future of the governor of the Fed, Lisa Cook, remains in the air as she calls into question Trump’s attempt to fire her before the courts. At the end of August, Trump said that he had dismissed her, citing unproven allegations of mortgage fraud, which the Ministry of Justice actively investigates.

Meanwhile, Miran is a new Fed voice that supports more aggressive rate drops.

The so -called dowry layout of the Fed – a graph of the EDF officials for their reference loan rate – has shown a point well below the other estimates, indicating that the official supports aggressive rate drops in 2025.

Democrats have raised concerns about Miran’s close ties with the president, stressing the fact that he is still technically an employee of the White House, because he takes a leave without pay while being governor of the Fed for a vacant mandate ending at the end of January. Miran, for his part, said that he would form independent opinions on the economy.