Powell stated that this rate cut is a risk management decision, with the policy focus shifting from inflation to employment

According to the Zhitong Finance APP, on Wednesday, after the Federal Reserve announced its latest interest rate decision, Chairman Powell stated at a press conference that this action is a "risk management" rate cut. As the job market cools, inflation remains above target, and short-term upward risks are tilted to the upside, the committee chose to take a step towards a more neutral policy stance while maintaining a "meeting-by-meeting" decision-making approach to flexibly adjust based on data and risks.

From a macroeconomic perspective, Powell noted that recent indicators show a slowdown in economic momentum, with U.S. GDP growth of about 1.5% in the first half of this year, down from 2.5% last year; the slowdown in consumption is the main drag, while business investment has rebounded compared to last year, and housing-related activities remain weak. In the latest economic projections (SEP), the Federal Reserve expects GDP growth of 1.6% this year and 1.8% next year, a slight upward revision from June. Regarding employment, "labor demand has softened," with an average of only 29,000 non-farm jobs added per month over the past three months, significantly below the "breakeven growth rate" needed to keep the unemployment rate stable; the unemployment rate remains low but has "marginally increased," and the committee believes that the downside risks to employment have risen. Wage growth continues to moderate but remains slightly above inflation. Powell emphasized that labor supply and demand have both "slowed down" over the past year, but demand has decreased more rapidly, leading to a simultaneous rise in the unemployment rate and a cooling in job creation.

On inflation, Powell pointed out that inflation has significantly retreated from its peak but is still "above the long-term target of 2%." Based on CPI and other data, the year-on-year PCE for the 12 months ending in August is about 2.7%, with core PCE, excluding food and energy, around 2.9%. Compared to the beginning of the year, the recent "uptick" in inflation mainly comes from the re-inflation of commodity prices, while the weakening of service inflation continues. Short-term inflation expectations have been lifted by tariff news, but longer-term inflation expectations are generally anchored around 2%. Powell reiterated that the basic scenario regarding tariffs is still "a one-time price level increase," but he does not rule out more persistent inflation effects; the committee's responsibility is to prevent "one-time price increases from evolving into a persistent inflation problem."

In terms of policy path, the dot plot shows a median year-end interest rate of about 3.6%, 3.4% in 2026, and 3.1% in 2027, which is a downward adjustment of 25 basis points from June; this indicates that most officials expect further rate cuts may still be possible within the year. Meanwhile, the balance sheet reduction continues to advance. Powell explained that the banking system is still in a "sufficient reserves" state, and the current intensity of balance sheet reduction has limited impact on the macroeconomy, more of a technical operation of "watching and walking" without disturbing the environment.

Regarding the question of "why cut rates while inflation is still high," a reporter asked whether today's action is an "insurance rate cut" or if a downturn is already a fact. Powell responded that it can be viewed as a "risk management" insurance rate cut: growth forecasts have been slightly revised upward, but the structure of employment risks has changed significantly, and employment "is indeed cooling," which the committee needs to reflect in policy settings. A reporter followed up, asking if the slowdown in employment is partly related to a decrease in immigration, and with inflation still significantly above target, why prioritize rate cuts? Powell explained that both labor supply and demand have decreased, with demand falling faster, and the rise in the unemployment rate is evidence of this; the committee must weigh its dual mandate, and the broadness and persistence of the recent second upward movement in inflation risks have eased compared to a few months ago, while the downside risks to employment have increased When asked by foreign media whether the current conditions no longer require "restrictive policies," Powell stated that this cannot be said; the "significantly tight" stance maintained this year was due to previously "very robust" employment, but now the risks are becoming more balanced, and the data points to an increased rationale for moving towards "neutral." Regarding whether to consider a one-time 50 basis point rate cut, he clearly stated that there is "no broad support," and it is not the time to "quickly move policy to another position."

Tariffs and inflation transmission are also focal points. Powell stated that over the past year, "goods inflation has been about 1.2%," contributing approximately 0.3 to 0.4 percentage points to core PCE. In terms of bearers, more costs are absorbed by companies in the import and distribution stages, with "transmission to consumers being slower and smaller than expected," but companies generally plan to "gradually pass on" costs. If prices unexpectedly rise again, the Federal Reserve will "do what is necessary," but in the unusual environment of "dual target tension," a dynamic balance must be struck regarding "the distance from the targets and the time required for return."

On financial stability and asset valuation, Powell stated that the Federal Reserve's primary task is "maximum employment and price stability," and it will closely monitor financial stability risks, but currently, from a structural vulnerability perspective, these risks are not high; regarding employment data revisions, the statistical system is improving models and recovery rates, "we make decisions based on the windshield rather than the rearview mirror," with the key being the current risk rebalancing.

Regarding independence and governance, foreign media mentioned whether the connection between Governor Milan and the executive branch affects the image and independence. Powell responded that new members are welcome, but the committee "unitedly pursues its dual mission" and is "firmly committed to independence." Powell emphasized that being data-driven is "deeply embedded in our institutional DNA," and the influence of the 19 participants and 12 voters can only achieve consensus through "strong data-based arguments," and the institution's "long-term independence" will not change. As for the lawsuit involving Governor Cook, Powell stated that he would not comment.

Reporters also asked about the employment pressures on young people and minorities, the potential impact of AI on the labor market, consumption stratification, and housing affordability. Powell stated that graduates and minorities find it harder to find jobs, and the combination of "low layoff rates and low hiring rates" increases risks; if broader layoffs occur, the low hiring rate will amplify the impact, which is also one reason for the policy's more balanced focus. Regarding AI, he believes it "may be one of the factors, but the evidence and magnitude are still uncertain." In terms of housing, monetary policy naturally has a strong impact through interest rate channels, and rate cuts help restore demand and supply, but "significant improvements usually require larger changes"; deeper supply shortages are not cyclical issues and exceed what monetary policy can solve alone.

In terms of market pricing and forward communication, the further easing space indicated by the dot plot for this year and the market's bets on the "rate cut path" are not "a predetermined route." Powell repeatedly emphasized that policy is "not on a preset track," and the differences reflect varying tolerances and risk assessments regarding the "tension between dual targets." The current 4.3% unemployment rate and about 1.5% growth are not indicative of a "bad economy," but for policy, "there is no risk-free path," and it is necessary to "keep one eye on inflation and one eye on maximum employment." Therefore, the committee will continue to anchor its actions in data and risks, dynamically calibrating the pace and magnitude