Jerome Powell is expected to signal caution ahead of the Fed meeting later this month as the US economy continues to grow faster than expected but remains unbalanced due to tariffs and immigration.
The Fed is facing a lack of official data due to the government shutdown, making Powell’s speech the main focus for any indication of the direction of monetary policy. Markets are expecting a quarter-point rate cut in October and December.
Economists say the US economy is being pulled in two directions: tariffs and labor restrictions are weighing on activity, while large investments in AI are boosting productivity.
Policymakers are also divided between inflation concerns and job market weakness, with some advocating gradual rate cuts to avoid policy mistakes.
The Philadelphia Fed warned that growth is now based on a limited base, while the long-term inflation risk from tariffs remains high through 2026.
