Powell suggests a further rate cut is likely this month and emphasizes that the downside risks to the job market remain unchanged.

Federal Reserve Chair Powell said that the Fed is likely to cut interest rates by another 25 basis points later this month, despite the severe impact of the government shutdown on its assessment of the economic situation. Powell said on Tuesday at the National Association of Business Economics annual meeting that since policymakers cut rates at their September meeting and projected two more cuts this year, the economic outlook seems unchanged. Julia Coronado, founder of the research firm MacroPolicy Perspectives and former Fed economist, said, "The October rate cut has already been implemented, and there is currently no new information to change our view that there are still risks of a slowdown in the labor market." Powell mentioned the slow pace of hiring several times and pointed out that this situation could worsen further. During a Q&A session following his prepared remarks, Powell said, "The current situation is that further job losses could lead to a rise in the unemployment rate. The situation has been very ideal so far, steadily declining, but I believe that we will eventually reach a stage where the unemployment rate starts to rise." After Powell's speech, market expectations for a rate cut in October did not change significantly. According to data from federal funds futures contracts, investors see the likelihood of a rate cut approaching 100%. The September rate cut was the first since December last year, following a significant slowdown in job growth throughout the summer. However, the unemployment rate remains relatively low, rising to 4.3% in August. Due to the ongoing government shutdown, the US Labor Department postponed the release of the September nonfarm payrolls report, but has recalled staff to prepare for the release of the September consumer price index data later this month. Yelena Shulyatyeva, senior economist at the Business Economics Association, said during a break at the meeting, "Currently, the risks in terms of employment are increasing due to this policy. This will directly affect recent decisions." The Fed is scheduled to hold its next meeting on October 28-29. Last month, the median estimate of its 19 policymakers showed two more 25 basis point rate cuts this year. However, 9 officials believed one or fewer cuts would be appropriate. Diane Swonk, chief economist at KPMG, said that the divergence among policymakers is making Powell more cautious about the direction of interest rates next year. She said, "These signs indicate that 'we're not really sure about the longer term path.'" With a lack of a complete set of official economic data, concerns are growing that the Fed may not accurately gauge the state of the economy, increasing the possibility of policy mistakes. For the Fed, the current lack of data is indeed a tricky issue. Its dual mandate of maintaining price stability and achieving full employment requires it to take divergent actions as the labor market cools while inflation remains above the central bank's 2% target. Powell said that he and his colleagues are looking for alternative data sources from the private sector, but he also emphasized the importance of government data as the "gold standard." Powell said, "We cannot expect to fully replace data that is unavailable. We are starting to miss that data, especially in October. If this situation continues, they will no longer collect data, making the situation even more challenging." Powell also said that the Fed may pause its balance sheet reduction in the coming months, a crucial shift to maintaining liquidity in the overnight funding market.