Fed’s Powell sees ‘no risk-free path’ for interest rates after central bank’s cut last week

Federal Reserve Chair Jerome Powell said there is “no risk-free path” for the central bank’s next policy move as inflation remains elevated and the job market weakens.

It’s “a challenging situation,” Powell said during a speech in Rhode Island on Tuesday, reiterating that the Fed must balance its dual goals of maximum employment and price stability.

“Two-sided risks mean that there is no risk-free path,” he added.

Powell on Tuesday repeated many of the same points he made last Wednesday after the central bank voted to cut interest rates 25 basis points and officials penciled in a median estimate of two more 25 basis point cuts by year-end.

The chairman is in a difficult spot, trying to maintain consensus within the Fed at a time when policymakers are divided about the future path of monetary policy and the White House is applying maximum pressure on the Fed to bring rates down further.

Stephen Miran, the newest Federal Reserve governor, said Monday in a speech that he believes benchmark interest rates should be around 2 percentage points lower than their current 4% to 4.25% range. He argued that today’s rates are too restrictive and could lead to more layoffs and worsening unemployment levels.

Miran, who is on a leave of absence from his White House job while serving as Fed governor, was the lone dissenter last week when the Fed voted to cut rates by a quarter point. He preferred a larger 50 basis point cut.

Read more: How jobs, inflation, and the Fed are all related

While signs of a weakening labor market spurred the most recent cut, many Fed officials are urging caution around further rate cuts because inflation remains above the Fed’s 2% target.

St. Louis Fed president Alberto Musalem said Monday he supported cutting interest rates last week as a “precautionary move” to guard against the risk of higher unemployment, but cautioned there is limited room for further rate cuts before risking a boost in inflation.

Atlanta Fed president Raphael Bostic also told the Wall Street Journal in an interview published Monday that inflation concerns would make him hesitant to support another rate cut in October.

The Personal Consumption Expenditures index, the Fed’s preferred inflation measure, stands at 2.9%. A new reading covering August data will be released on Friday.

Powell once again did not address any remarks from President Trump, who has repeatedly said he would like to see lower interest rates and has criticized Powell for being “too late” to cut interest rates.

Read more: How the Fed rate decision affects your bank accounts, loans, credit cards, and investments