Federal Reserve Chair Jerome Powell struck a cautious note during a speech in Providence, Rhode Island, on September 23, 2025. He emphasized that the U.S. central bank faces “two-sided risks” — stubborn inflation on one side and a cooling labor market on the other — making the path ahead complex and uncertain.
Markets reacted modestly lower following his comments, with the Dow Jones Industrial Average slipping around 0.2%, the S&P 500 down 0.6%, and the Nasdaq falling about 0.5%.
Powell: Inflation and Jobs in Tension
Powell repeated that the Fed’s job is complicated by opposing signals. Inflation remains above the 2% target, while the labor market has lost momentum.
“There is no risk-free path,” Powell said, warning that cutting rates too aggressively could let inflation resurface, while moving too slowly could weigh further on employment.
The Fed earlier this month trimmed its benchmark rate by 25 basis points to a target range of 4.00%–4.25%, the first cut since December 2024. Powell described that move as a “risk-management” step rather than the start of rapid easing. He made clear that future decisions will be taken “meeting by meeting,” guided by incoming data.
Jobs Growth Slows
Fresh data confirm the slowdown. According to the Bureau of Labor Statistics, nonfarm payroll employment in August rose by just 22,000 jobs, the weakest monthly gain since 2021. The unemployment rate edged up to 4.3%, compared with 3.9% earlier in the year. Revisions also showed June payrolls turning negative, with a loss of 13,000 jobs.
These figures highlight the challenges facing policymakers as they balance their dual mandate of price stability and maximum employment.
Stocks and Gold React
Equity markets, which had recently hit record highs, pulled back after Powell noted that “by many measures, equity prices are fairly highly valued.” While he emphasized that the Fed does not target stock levels, the remark underscored concerns about stretched valuations.
Gold, often seen as a safe-haven asset, surged to an all-time intraday high of $3,790 per ounce on Tuesday before easing slightly to around $3,777. Analysts pointed to expectations of slower rate cuts and global uncertainty as drivers of the rally.
What’s Next
Investors are now focused on two key signals:
- Core PCE inflation data (due Friday), the Fed’s preferred gauge, which will influence the pace of future rate moves.
- Labor market trends in upcoming monthly reports, to see if weakness deepens or stabilizes.
Bottom Line
Powell’s latest remarks underline the Fed’s cautious approach. With inflation still above target and job growth slowing, policymakers are not rushing to commit to further rate cuts. Markets may face more volatility as investors adjust to a slower, data-dependent path ahead.
