Powell Raises Concern about Labor Market Impact on Inflation, Signals Preemptive Action

U.S. Federal Reserve Chair Jerome Powell has warned that preemptive action may be necessary to combat inflation if a tight labor market threatens price stability. He clarified that exceeding employment levels beyond their sustainable maximum does not necessarily necessitate policy tightening. Following Powell’s statement, financial markets have fully priced in the likelihood of two rate cuts by the end of the year.