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The Fed shifts focus to employment, Powell says inflation risks have dropped.
On September 18, Fed Chairman Powell emphasized that, given signs indicating that the labor market is "truly cooling," the Fed is leaning towards achieving "maximum employment" in its dual mandate after a long-term focus on inflation. He stated that since April, the persistent high inflation risks have diminished, partly due to a slowdown in job growth. The Fed's basic assumption is that the impact of tariffs on inflation may be temporary. He noted, on the other hand, that the downside risks in the labor market have increased, and the number of new jobs appears to be below the so-called "breakeven rate" required to keep the unemployment rate unchanged.