For release on delivery

12:35 p.m. EDT

September 23, 2025

Economic Outlook

Remarks by

Jerome H. Powell

Chair

Board of Governors of the Federal Reserve System

at the

Greater Providence Chamber of Commerce

2025 Economic Outlook Luncheon

Warwick, Rhode Island

September 23, 2025

 Thank you. It is a pleasure to be back here in Rhode Island. The last time I had

the opportunity to speak to the Greater Providence Chamber of Commerce was in the fall

of 2019. I noted then that, “if the outlook changes materially, policy will change as

well.” 1

Little did any of us know! Just a couple of months later, the COVID-19 pandemic

arrived. Both the economy and our policy evolved dramatically in ways no one could

have predicted. Along with actions by Congress, the Administration, and the private

sector, the Fed’s aggressive response helped stave off historically severe downside risks

to the economy.

The COVID pandemic came on the heels of the painfully slow decade-long

recovery from the Global Financial Crisis. These two back-to-back world historical

crises have left behind scars that will be with us for a long time. In democracies around

the world, public trust in economic and political institutions has been challenged. Those

of us who are in public service at this time need to focus tightly on carrying out our

critical missions to the best of our ability in the midst of stormy seas and powerful

crosswinds.

Throughout this turbulent period, central banks like the Fed have had to develop

innovative new policies that were designed to deliver on our statutory goals during times

of crisis, rather than for everyday use. Despite these two unique, extremely large shocks,

the U.S. economy has performed as well or better than other large, advanced economies

around the world. As always, it is essential that we continue to look back and learn the

1
See Jerome H. Powell (2019), “Building on the Gains from the Long Expansion,” speech delivered at the
Annual Meeting of the Greater Providence Chamber of Commerce, Providence, Rhode Island,
November 25, paragraph 21, https://www.federalreserve.gov/newsevents/speech/powell20191125a.htm.
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right lessons from these difficult years, and that process has been ongoing for more than a

decade.

Turning to the present day, the U.S. economy is showing resilience in the midst of

substantial changes in trade and immigration policies, as well as in fiscal, regulatory and

geopolitical arenas. These policies are still emerging, and their longer-term implications

will take some time to be seen.

Economic Outlook

Recent data show that the pace of economic growth has moderated. The

unemployment rate is low but has edged up. Job gains have slowed, and the downside

risks to employment have risen. At the same time, inflation has risen recently and

remains somewhat elevated. In recent months, it has become clear that the balance of

risks has shifted, prompting us to move our policy stance closer to neutral at our meeting

last week.

GDP rose at a pace of around one and a half percent in the first half of the year,

down from 2.5 percent growth last year. The moderation in growth largely reflects a

slowdown in consumer spending. Activity in the housing sector remains weak, but

business investment in equipment and intangibles has picked up from last year’s pace.

As noted in the September Beige Book, a report that gathers qualitative information from

across the Fed System, businesses continue to say that uncertainty is weighing on their

outlook. Measures of consumer and business sentiment declined sharply in the spring;

they have since moved up but remain low relative to the start of the year.

In the labor market, there has been a marked slowing in both the supply of and

demand for workers—an unusual and challenging development. In this less dynamic and
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somewhat softer labor market, the downside risks to employment have risen. The

unemployment rate edged up to 4.3 percent in August but has remained relatively stable

at a low level over the past year. Payroll job gains slowed sharply over the summer

months, as employers added an average of just 29,000 per month over the past three

months. The recent pace of job creation appears to be running below the “breakeven”

rate needed to hold the unemployment rate constant. But a number of other labor market

indicators remain broadly stable. For example, the ratio of job openings to

unemployment remains near 1. And multiple measures of job openings have been

moving roughly sideways, as have initial claims for unemployment insurance.

Inflation has eased significantly from its highs of 2022 but remains somewhat

elevated relative to our 2 percent longer-run goal. The latest available data indicate that

total PCE prices rose 2.7 percent over the 12 months ending in August, up from 2.3

percent in August 2024. Excluding the volatile food and energy categories, core PCE

prices rose 2.9 percent last month, also higher than the year-ago level. Goods prices,

after falling last year, are driving the pickup in inflation. Incoming data and surveys

suggest that those price increases largely reflect higher tariffs rather than broader price

pressures. Disinflation for services continues, including for housing. Near-term

measures of inflation expectations have moved up, on balance, over the course of this

year on news about tariffs. Beyond the next year or so, however, most measures of

longer-term expectations remain consistent with our 2 percent inflation goal.

The overall economic effects of the significant changes in trade, immigration,

fiscal and regulatory policy remain to be seen. A reasonable base case is that the tariff-

related effects on inflation will be relatively short lived—a one-time shift in the price
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level. A “one-time” increase does not mean “all at once.” Tariff increases will likely

take some time to work their way through supply chains. As a result, this one-time

increase in the price level will likely be spread over several quarters and show up as

somewhat higher inflation during that period.

But uncertainty around the path of inflation remains high. We will carefully

assess and manage the risk of higher and more persistent inflation. We will make sure

that this one-time increase in prices does not become an ongoing inflation problem.

Monetary Policy

Near-term risks to inflation are tilted to the upside and risks to employment to the

downside—a challenging situation. Two-sided risks mean that there is no risk-free path.

If we ease too aggressively, we could leave the inflation job unfinished and need to

reverse course later to fully restore 2 percent inflation. If we maintain restrictive policy

too long, the labor market could soften unnecessarily. When our goals are in tension like

this, our framework calls for us to balance both sides of our dual mandate.

The increased downside risks to employment have shifted the balance of risks to

achieving our goals. We therefore judged it appropriate at our last meeting to take

another step toward a more neutral policy stance, lowering the target range for the federal

funds rate by 25 basis points to 4 to 4¼ percent. This policy stance, which I see as still

modestly restrictive, leaves us well positioned to respond to potential economic

developments.

Our policy is not on a preset course. We will continue to determine the

appropriate stance based on the incoming data, the evolving outlook, and the balance of

risks. We remain committed to supporting maximum employment and bringing inflation

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sustainably to our 2 percent goal. Our success in delivering on these goals matters to all

Americans. We understand that our actions affect communities, families, and businesses

across the country.

Thank you again for having me here. I look forward to our discussion.