Yeliz Akmaca 
Federal Reserve Chair Jerome Powell stated that recent data indicates a labor market characterized by both low hiring and low layoffs. He emphasized that there is no risk-free path for monetary policy, underlining the need for caution in future decisions.
According to Powell, data prior to the U.S. government shutdown suggested that economic growth was stronger than expected, with the economy returning to September levels. However, tariffs continue to increase price pressures, complicating the fight against inflation.
“The Fed must move carefully. Acting too quickly could leave the inflation battle unfinished,” Powell warned. He added that ending balance sheet expansion earlier would have made little difference, noting that balance sheet management remains a key tool of monetary policy.
Fed Nearing End of Balance Sheet Reduction
Powell indicated that the Federal Reserve could end its balance sheet reduction process in the coming months. This development comes amid signs of mild tightening in money markets. “We’re not far from our target, but there’s still some way to go,” he said, stressing that reserves remain abundant.
The Fed Chair also cautioned that a further decline in job openings could push unemployment higher. Research shows that the effects of monetary policy on employment and inflation take longer to materialize, making sudden policy shifts risky.
Powell warned that the slow pass-through of tariffs could pose a risk of persistent inflation, while declining to comment on gold or Bitcoin prices. “Inflation is driven by fundamental supply and demand factors,” he said, reaffirming the Fed’s data-dependent policy approach.
Powell’s remarks suggest that the Fed will remain data-driven and cautious in the months ahead. Markets are closely watching new signals regarding interest rates, balance sheet policy, and the inflation outlook.
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