Fed's Powell: Concern About Weak Labor Market Still Slightly Greater Than Concern About Inflation Upside Risk

**December 12th** Philadelphia Fed President Paulson said her top current concern is the labor market, adding the Federal Reserve’s current policy stance should help push inflation back to the 2% target. “Right now, I’m slightly more worried about labor market softness than upside inflation risks,” Paulson noted. “With tariff impacts fading gradually next year, there’s a high chance inflation will ease steadily.” She emphasized monetary policy remains “somewhat restrictive,” saying the current rate level—combined with the cumulative effect of past tightening—will support inflation’s return to 2%. Paulson described the labor market as “bending but not breaking,” and pointed out three consecutive rate cuts totaling 75 basis points have provided “insurance” against further deterioration in the job market.