NextFin news, Federal Reserve Chair Jerome Powell spoke on Friday, September 19, 2025, in Washington, D.C., about the significant influences of artificial intelligence (AI), immigration policies, and tariffs on the current U.S. economic landscape.
Powell identified reduced immigration and declining labor force participation as primary contributors to the recent slowdown in the U.S. labor market. He noted that these factors have led to a contraction in labor supply, which, combined with a decrease in labor demand, has created an unusual equilibrium affecting employment levels.
Regarding tariffs, Powell explained that the inflationary effects of tariff policies implemented during the previous administration are expected to accumulate through the remainder of 2025 and into 2026. He highlighted that goods prices have risen, contributing significantly to inflation increases observed this year, although the full impact on consumer prices has yet to be realized as some costs are absorbed by firms.
On the role of artificial intelligence, Powell acknowledged that AI is influencing the labor market to some extent, with some companies opting to use AI technologies instead of hiring new employees. However, he emphasized that AI is only one factor among several, including the broader economic slowdown, affecting employment trends.
Powell also discussed the Federal Reserve's recent decision to cut the policy interest rate by 0.25 percentage points on September 17, 2025. He explained that the rate cut was motivated by emerging labor market risks, particularly the evident cooling in employment growth from April to August 2025. The Fed aims to balance its dual mandate of controlling inflation and supporting employment, moving toward a more neutral policy stance in response to shifting economic conditions.
Addressing concerns about inflation, Powell stated that while inflation remains above the 2% target, the risk of persistent high inflation has diminished due to the labor market cooling. He reaffirmed the Fed's commitment to achieving the 2% inflation goal over the medium term.
Powell also responded to questions about political independence, asserting that the Federal Reserve's decisions are data-driven and free from political influence, despite recent appointments and external pressures.
The press conference provided detailed insights into the complex interplay of immigration policy, tariff-induced inflation, and technological change shaping the U.S. economy as of late 2025.
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