Emphasizing the Balance Between Inflation and Employment
"Recent Rise in Inflation Largely Attributed to Tariffs"
Jerome Powell, Chair of the United States Federal Reserve, stated that excessively easing the benchmark interest rate could make it difficult to curb inflation, and emphasized that there is no urgent need to lower rates.
On September 23 (local time), during a speech at the Rhode Island Chamber of Commerce, Powell assessed, "In the short term, inflation risks are tilted to the upside, while employment risks are tilted to the downside. It is a challenging situation."
He said, "When there are two-sided risks like this, there is no option without risk." He added, "If we ease (rates) too aggressively, we may leave the task of curbing inflation unfinished, and later, we might have to shift policy back to rate hikes to restore the 2% inflation target."
Powell noted, "If we maintain a tight policy for too long, the job market could contract unnecessarily." He emphasized, "When our goals (price stability and maximum employment) are in tension, the Federal Reserve's policy framework has always required us to balance both objectives." He further explained that "as downside risks to employment have increased, there has been a shift in how we balance risks in achieving our goals," describing the background to the Fed's recent rate cut.
On September 17, the Federal Open Market Committee (FOMC) decided to lower the benchmark interest rate from the previous range of 4.25-4.50% to 4.00-4.25%. This was the first rate cut in nine months since the 0.25 percentage point reduction in December of last year. Regarding this, Powell stated, "I personally still view this policy stance as somewhat restrictive, which puts us in a good position to respond to potential economic changes."
He added, "Our policy is not on a predetermined path," and said, "The Federal Reserve will continue to determine the appropriate policy stance based on incoming data, evolving outlooks, and the balance of risks." He emphasized, "We are committed to supporting maximum employment and aligning inflation with the 2% target."
Additionally, Powell pointed out, "Recently, inflation has risen and remains somewhat elevated," and explained, "Recent data and surveys indicate that this price increase is more greatly influenced by tariffs than by overall inflationary pressure." He added that while tariff-related price hikes may be relatively short-lived, "it may take some time for tariff increases to be fully reflected throughout supply chains. As a result, this one-off price increase could spread over several quarters and manifest as somewhat higher inflation."
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