Federal Reserve Chair Jerome Powell warned Tuesday that the U.S. economy faces serious threats regardless of the approach the central bank takes to bringing down interest rates.

In a Tuesday speech, Powell said the Fed is trying to balance a weakening labor market with rising inflation as it plots a plan for interest rates, but faces obstacles on both sides.

“There is no risk-free path for policy as we navigate the tension between our employment and inflation goals,” Powell said at the National Association for Business Economics (NABE) conference in Philadelphia.

The Fed is responsible for maximizing employment while keeping inflation as close to 2 percent annually as possible, a dynamic known as the “dual mandate.” The bank typically does this by cutting interest rates to stimulate the economy when unemployment is rising, and raising interest rates to slow the economy when inflation is rising.

The Fed, however, is facing both problems at the same time — a rare and complicated problem for the bank to fight, especially with interest rates already at levels that could slow the economy.

The U.S. job market has slowed significantly since the start of the year, with the country adding an average of just 29,000 jobs a month. The unemployment rate has risen to 4.3 percent from 4 percent in January, and the rate of hiring has slowed to levels not seen since the COVID-19 pandemic.

Inflation has also been picking up steam throughout the year as President Trump’s tariffs raise the costs of major goods. Prices are up roughly 3 percent over the past year, well above the Fed’s target of 2 percent.

“While official employment data for September are delayed, available evidence suggests that both layoffs and hiring remain low, and that both households’ perceptions of job availability and firms’ perceptions of hiring difficulty continue their downward trajectories,” Powell said.

The inflation surge had derailed the Fed’s plans to cut interest rates during the beginning of the year, drawing fury from Trump. But the Fed shifted course last month, cutting interest rates to stave off the rising risks facing the labor market.

Powell’s remarks come two weeks before the Fed’s next policy meeting, where officials are expected to cut interest rates again. Powell and his colleagues will have to make that final judgment without the latest federal employment data due to the government shutdown.

“Based on the data that we do have, it is fair to say that the outlook for employment and inflation does not appear to have changed much since our September meeting four weeks ago. Data available prior to the shutdown, however, show that growth in economic activity may be on a somewhat firmer trajectory than expected,” Powell said, underscoring the conflict the Fed faces.

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