"If the Fed were to cut rates "too aggressively," Powell said, "we could leave the inflation job unfinished and need to reverse course later" and raise rates."
"But if the Fed keeps its rate too high for too long, "the labor market could soften unnecessarily," he added."
""it's challenging to know what to do.""
"the Fed should quickly reduce its rate to as low as 2% to 2.5%, from its current level of about 4.1%."
Federal Reserve Chair Jerome Powell emphasized caution about future interest-rate cuts and highlighted risks to both maximum employment and price stability. The unemployment rate has risen, and the Fed agreed to cut its key rate last week, but no further cuts were signaled. Powell warned that cutting rates too aggressively could leave inflation control incomplete and require later rate increases, while keeping rates too high for too long could unnecessarily soften the labor market. Other Fed officials, including Stephen Miran and Michelle Bowman, urged quicker cuts citing cooling inflation and a stumbling job market. Rate cuts typically reduce borrowing costs for mortgages, cars, and business loans.
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