Federal Reserve Chair Jerome Powell said the U.S. economy is running stronger than expected, according to data released before the recent government shutdown. Speaking at the National Association for Business Economics conference in Philadelphia, he suggested the Fed may soon pause its balance-sheet reductions.
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Powell noted that bank reserves are approaching “ample” levels and the central bank is carefully weighing its next steps. “We may approach that point in the coming months, and we are closely monitoring a wide range of indicators,” he said.
The Fed’s bond holdings, which peaked near $9 trillion during the pandemic, have gradually declined since mid-2022. Powell warned that liquidity is tightening. He added that further reductions could slow lending or hurt growth. However, he emphasized that the Fed does not plan to return to pre-COVID levels.
On interest rates, Powell said officials are balancing risks. Moving too fast could leave inflation unchecked. On the other hand, moving too slowly could hurt jobs. Data after July shows the labor market softening. It shows slower payroll gains and weaker labor force growth. The Fed already cut rates by 0.25% in September. The markets expect more cuts. Still, Powell did not confirm a timeline.
He also said the recent government shutdown complicated economic analysis by delaying key reports like payrolls and inflation data. “Based on the data we do have, growth may be on a somewhat firmer trajectory than expected,” Powell added.
Investors are closely watching for signals on how the Fed will balance inflation control with employment, particularly as uncertainty from the shutdown continues to impact forecasts.
