• The Federal Reserve's median projection for 2025 GDP growth is 1.6%, slightly higher than June's estimate.
  • Core PCE inflation remains elevated at 2.6% for July 2025, marking more than 50 consecutive months above the Fed's 2% target.
  • Job growth shows significant signs of weakening, with only 22,000 new jobs added in August and net losses earlier in the summer, shifting consensus toward a potential rate cut.

Federal Reserve Chair Jerome Powell began his highly anticipated press conference Wednesday following the conclusion of the two-day Federal Open Market Committee meeting, striking a measured tone as the central bank navigates a complex economic crosscurrent of persistent inflation and a rapidly cooling labor market.

The updated Summary of Economic Projections reveals a committee cautiously adjusting its outlook. The median forecast for real GDP growth in 2025 now sits at 1.6%, a modest upward revision from June. However, this slight optimism is heavily tempered by concerning data on other fronts. The core Personal Consumption Expenditures price index, the Fed's preferred inflation gauge, held at 2.6% in July, cementing a stretch of more than four years above the central bank's target.

"The data have become more two-sided," Powell acknowledged in his opening remarks, referring to the tension between price stability and maximum employment mandates. "We are fully aware of the risks presented by the recent labor market data."

The jobs picture has indeed darkened considerably. The addition of a mere 22,000 nonfarm payrolls in August, coupled with net job losses in the preceding months, suggests the previously robust employment engine is stalling. This stagnation has accelerated private discussions among some FOMC participants about the need for accommodative policy, with a consensus shifting toward a possible interest rate cut in the 25 to 50 basis point range, according to people familiar with the matter.

Most participants now see the risks to economic growth as tilted to the downside, while risks to the unemployment rate are weighted to the upside—a clear signal of growing concern about the outlook. This puts the Fed in a delicate position, attempting to avoid prematurely cutting rates and reigniting inflation while also responding to clear softness in the labor market that could threaten the expansion.

Market participants hung on every word for clues on the timing and magnitude of any policy shift. When asked directly about the potential for a cut at the next meeting, Powell remained non-committal, stating the committee would remain "data-dependent" and would need to see "a sustained change in the trajectory" of key indicators.

The Fed's latest GDPNow model estimate suggests annualized growth of 3.3% for the third quarter, though this figure is subject to significant revision as new data arrives. For households and businesses, the extended period of high inflation continues to squeeze real purchasing power, even as the job market shows signs of fraying, creating a palpable sense of economic anxiety that was hinted at in Powell's sober assessment.

Attempts to reach several regional Fed presidents for additional comment following the press conference were not immediately successful.

Correction: An earlier version of this article misstated the number of consecutive months core PCE inflation has been above target. It is more than 50 months, not 40.