The head of Federal Reserve recently signalled that the U.S. labour market is showing signs of weakening — a trend the Fed is watching closely, even as inflation remains somewhat elevated.

During the latest policy meeting, the Fed reduced interest rates by 25 basis points and paused its balance-sheet runoff, noting that job-gains have slowed this year while unemployment edged up. Powell emphasized that available private-sector and public-sector data suggest a “low-hire, low-fire” dynamic: firms aren’t hiring aggressively, but layoffs remain modest — pointing to a gradually cooling labour market rather than an abrupt downturn.

This situation creates a policy dilemma: while the Fed remains committed to its dual mandate of stable prices and maximum employment, persistent price pressures mean rate cuts must be balanced carefully.

For households and businesses, this could mean a modest easing in borrowing costs — making loans and mortgages slightly cheaper if the Fed continues on this path. But the real indicator will be upcoming employment and inflation data, which will guide whether this is the start of a series of cuts or a pause.

In short: Powell’s comments underscore that the Fed sees a weakening labour market as a valid reason to ease policy — but they’re not rushing. Any future action remains data-dependent and measured.