Powell flags hiring slowdown risk as Fed signals cautious rate cuts

Federal Reserve Chair Jerome Powell said Tuesday that a sharp slowdown in U.S. hiring has become a growing risk to the economy and signaled the central bank is likely to move cautiously but may still cut interest rates further this year. Speaking in Philadelphia at the National Association for Business Economics annual meeting, Powell said the outlook for employment and inflation has not materially changed since the Fed's September meeting, where officials reduced the policy rate by 25 basis points.

Powell said rising downside risks to the labor market have altered the balance of risks facing policymakers. "Rising downside risks to employment have shifted our assessment of the balance of risks," he said in prepared remarks. With official statistics delayed by a federal government shutdown, he said the Fed has drawn on a broader set of public and private data and continues to take a meeting-by-meeting approach to any further easing.

Markets have already priced in additional easing, with measures of market expectations showing a high probability of a 25 basis point cut in October and a strong chance of another cut in December. Such cuts would reduce borrowing costs for mortgages,...