In what is expected to be his final public remarks before the Federal Reserve’s October rate decision, Chair Jerome Powell said there is no "risk-free" path for policy, as the labor market shows signs of cooling while inflation remains above the Fed’s 2% target.

Powell delivered the Adam Smith Award lecture before the National Association for Business Economics in Philadelphia Oct. 14, where he defended the Fed’s balance sheet and participated in a Q&A session. His comments suggested that the Fed remains on track to cut interest rates again at its two-day meeting on Oct. 28 and 29.

Despite gaps in federal data caused by the government shutdown, he said, "it is fair to say that the outlook for employment and inflation does not appear to have changed much since our September meeting."

However, he said data available prior to the shutdown show the economy overall "may be on a somewhat firmer trajectory than expected."

During his remarks, Powell noted 12-month core PCE inflation was 2.9% in August, up slightly from earlier this year, and that there were "significant downside risks" in the labor market. The latest publicly available Bureau of Labor Statistics jobs report showed employers added just 22,000 jobs in August, and private-sector data released since has indicated further cooling.

Fed will consider non-government data during shutdown

Powell said that the Federal Open Market Committee will continue to follow its meeting schedule, making decisions based on available data. Without the BLS' key jobs report, Powell said the committee will consider alternative sources, including state-level unemployment claims reports and ADP’s National Employment Report, which found private U.S. employers shed 32,000 jobs in September.

"Generally, the private data, the alternative data that we look at is better used as a supplement for the underlying governmental data, which is the gold standard," Powell said. "It won’t be as effective as the main course as it would have been as a supplement."

The bureau announced it would publish September’s consumer inflation report (CPI) on Oct. 24 to help the Social Security Administration determine its annual cost-of-living adjustment for 2026, meaning FOMC members will have a chance to review it before their two-day meeting at the end of October.

Tariffs and the Fed's balancing act

Focused on its dual mandate of stable prices and maximum employment, Powell acknowledged the risk that tariffs could contribute to persistent inflation rather than a one-time adjustment if the pass-through to consumer prices is slower than expected.

Tariffs pose a challenge to the Fed because they can both raise consumer prices and slow economic growth, forcing the central bank to walk a delicate tightrope.

"If we move too quickly, then we may leave the inflation job unfinished and have to come back later and finish it," Powell said. "If we move too slowly, there may be unnecessary losses, painful losses in the employment market."

Reach Rachel Barber at rbarber@usatoday.com and follow her on X @rachelbarber_

This article originally appeared on USA TODAY: Powell says no 'risk-free' path as Fed weighs rate cut amid shutdown

Reporting by Rachel Barber, USA TODAY / USA TODAY

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