Powell’s remarks highlighted the inherent difficulty of balancing inflation and employment under the Fed’s current dual mandate.

The Federal Reserve lowered the federal funds target range by 25 basis points on Wednesday—its third consecutive rate cut—to 3.5 to 3.75 percent. Markets had anticipated the decision for weeks, reflecting growing expectations that the Fed would respond to rising downside risks in the labor market. Three officials dissented: Governor Stephen Miran again favored a larger 50-basis-point cut, while Chicago and Kansas City Fed Presidents Austan Goolsbee and Jeffrey Schmid preferred to hold rates steady. Schmid’s dissent was his second in as many meetings.

Powell used his press conference to place the decision within the broader tensions facing the Fed’s dual mandate. He emphasized that “[c]onditions in the labor market appear to be gradually cooling, and inflation remains somewhat elevated.” He noted that the government shutdown restricted access to some data, but that the available evidence suggests the “outlook for employment and inflation has not changed much” since the Fed’s October meeting.

Still, Powell said the available indicators point to moderate economic growth, supported by solid consumer spending and continued business fixed investment. He noted that the temporary government shutdown likely slowed activity somewhat, but that this effect “should be mostly offset by higher growth” in the coming months. The updated Summary of Economic Projections reinforces that outlook, with the median projection for 2025 GDP growth rising modestly from 1.6 in September to 1.7 percent.

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