• Jerome Powell warns of increasing employment risks due to a slowdown in U.S. hiring.
• The Federal Reserve is likely to cut interest rates twice more this year.
• Current economic conditions prompt a reevaluation of the Fed's policy balance between employment and inflation.

Federal Reserve Chair Jerome Powell expressed concerns on Tuesday regarding a sharp slowdown in U.S. hiring, framing it as a growing risk to the economy. At a conference in Philadelphia, Powell stated that even with the ongoing government shutdown affecting the release of official job data, "the outlook for employment and inflation does not appear to have changed much since our September meeting," when the Fed had already reduced its key interest rate for the first time this year. Powell indicated that two additional rate cuts might occur before the year's end, as the Fed continues to assess the balance of risks within the job market according to Channel News Asia and Los Angeles Times.

The central bank's concern for employment has intensified as Powell reiterated a message from the recent past, highlighting that the Fed is presently more worried about job growth compared to its other mandate of keeping inflation stable. The inflation rate has increased to 2.9% due to tariffs, yet Powell asserted there are currently no "broader inflationary pressures" that would sustain high price levels. Underlying this economic landscape are expectations for further rate cuts at the Fed's meetings scheduled for October 28-29 and December, drawing insights from India Times and CBS News.

In addressing the Fed's expansive balance sheet, Powell suggested that the central bank may soon cease its current practice of allowing $40 billion of Treasury securities and mortgage-backed securities to mature each month without replacement. This strategy, which could lead to lower borrowing costs over time, aligns with Powell's acknowledgment of rising employment risks that have shifted the Fed's assessment of policy balance. Despite criticisms of the Fed's previous quantitative easing measures, Powell emphasized that these were essential to avoid severe market disruptions during the pandemic, as reported by Channel News Asia and Los Angeles Times.

Powell’s remarks come amidst a landscape where economists have solidified expectations for further rate cuts due to the job market's constraints, while he maintains that the Fed's decisions will continue to navigate the balance between employment goals and inflation control. Observations from investment strategists indicate that the central bank still has significant options available as it prepares for its next actions in October and December, reflecting insights from Los Angeles Times and India Times.