Federal Reserve Chair Jerome Powell on Tuesday delivered his final speech before the Fed’s upcoming policy meeting, navigating a U.S. economy torn between strong growth, rising productivity, and mounting inflation risks.
The address comes as policymakers grapple with incomplete economic data amid a U.S. government shutdown that has delayed the September jobs report and other key statistics. The next update on consumer prices is due October 24, just days before the Fed’s October 28–29 meeting.
Markets expect the Fed to cut its benchmark interest rate by 0.25 percentage points, to a range of 3.75 per cent –4.00 per cent, and possibly again in December. But economists warn that opposing forces such as tariffs, immigration curbs, and surging AI investments are pulling the economy in different directions.
“There are conflicting forces affecting the U.S. economy,” said Gregory Daco, Chief Economist at EY-Parthenon, during the National Association for Business Economics (NABE) conference, where Powell spoke. “Tariffs and reduced immigration are constraints, while AI investment is fueling growth. It’s a fascinating duel.”
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Inside the Fed, opinions are split. Some officials fear inflation still above the 2 per cent target will persist through next year, while others warn of weakening job growth.
“Something’s got to give,” said Fed Governor Christopher Waller. He highlighted a puzzling contrast: GDP growth is tracking near 4%, yet private data show the economy lost jobs in September. “You can’t have negative job growth and 4% GDP growth,” Waller said, favoring cautious, quarter-point rate cuts to protect jobs without fueling inflation.
The Fed’s September rate cut aimed to strike that balance easing strain on the labour market while keeping inflation pressures in check.
Economists say the coming months will reveal more about the long-term impact of President Donald Trump’s policies from tariffs and tax changes to tighter immigration rules. Many companies, according to surveys and earnings reports, are still adapting.
Some have absorbed tariff costs by cutting expenses or reducing profit margins, temporarily boosting productivity. However, economists warn that consumer price hikes are likely in 2026 as firms pass costs to buyers.
A NABE forecast expects inflation to hover around 2.5% next year, while Harvard economist Karen Dynan projects it could climb as high as 3.3% through 2026.
“If inflation expectations drift upward, future Fed rate cuts could be seen as a mistake,” Dynan cautioned.
Productivity Boom or Narrow Growth?
Not all Fed officials are pessimistic. Philadelphia Fed President Anna Paulson suggested a budding productivity boom led by AI investments and strong consumer spending among higher-income Americans could sustain growth without driving prices up.
“I don’t want to step on a productivity boom,” Paulson said, calling two more quarter-point cuts this year “appropriate.” Still, she warned that growth now relies on “a relatively narrow base” and questioned where future demand will come from.
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With the jobs report delayed and inflation data still pending, Powell’s upcoming decision will test the Fed’s ability to balance growth, jobs, and prices in an economy caught between resilience and risk.
For now, the U.S. economy is growing fast, inflation remains stubborn, and policymakers are walking a tightrope — with global markets watching every move.
Esther Ososanya is an investigative journalist with Pinnacle Daily, reporting across health, business, environment, metro, Fct and crime. Known for her bold, empathetic storytelling, she uncovers hidden truths, challenges broken systems, and gives voice to overlooked Nigerians. Her work drives national conversations and demands accountability one powerful story at a time.
