A sharp slowdown in hiring poses a growing risk to the U.S. economy, Federal Reserve Chair Jerome Powell said Tuesday, a sign that the Fed will likely cut its key interest rate twice more this year.

Powell said in written remarks that despite the federal government shutdown cutting off official economic data, “the outlook for employment and inflation does not appear to have changed much since our September meeting,” when the Fed reduced its key rate for the first time this year.

Fed officials at that meeting also forecast that the central bank would reduce its rate twice more this year and once in 2026. Lower rates from the Fed could reduce borrowing costs for mortgages, car loans, and business loans. Powell is speaking before a meeting of the National Association of Business Economics in Philadelphia.

Powell reiterated a message he first delivered after the September meeting, when he signaled that the Fed is slightly more worried about the job market than its other congressional mandate, which is to keep prices stable. Tariffs have lifted the Fed's preferred measure of inflation to 2.9%, he said, but outside the duties there aren't “broader inflationary pressures” that will keep prices high.

“Rising downside risks to employment have shifted our assessment of the balance of risks,” he said.

Separately, Powell spent most of his speech defending the Fed's practice of buying longer-term Treasury bonds and mortgage-backed securities in 2020 and 2021, which were intended to lower longer-term interest rates and support the economy during the pandemic.

Yet those purchases have come under a torrent of criticism from Treasury Secretary Scott Bessent, as well as some of the candidates floated by the Trump administration to replace Powell when his term as Chair ends next May.

Powell defended the purchases and said they were intended to avoid a breakdown in the market for Treasury securities, which could have sent interest rates much higher.