The United States Federal Reserve is facing challenges as Federal Reserve Chair Jerome Powell highlighted the cooling job market and the potential for rate cuts in response to ongoing economic conditions. Powell noted the Fed's progress in combating a significant inflation spike, emphasizing the need for further steps to address the current economic landscape. Powell pointed out the reductions in inflation over the past two years but noted that it still exceeds the central bank's target. He cautioned against the risks of cutting interest rates too late or too conservatively, as it could negatively impact economic activity and employment. During his testimony to the US Congress, Powell addressed the Senate Banking Committee, indicating a shift towards potential interest rate cuts. He mentioned that recent inflation data did not fully reassure Fed officials about controlling inflation. Powell expressed the importance of sustained progress towards the 2 percent inflation target. Economists like Gregory Daco expressed support for Powell's focus on the risks to the economic outlook and suggested a rate cut at the upcoming Fed meeting to prevent potential layoffs amid a slowing economy. Slowing job market: Powell acknowledged the considerable cooling of the job market and the moderated economic growth following a robust expansion in the previous year. Despite stable hiring in June, the unemployment rate increased for the third consecutive month. He assured that the job market is not a significant source of inflationary pressures. Powell's remarks are closely watched for indications of the timing of potential rate cuts by the Fed. Although he refrained from specifying a timeline, expectations are rising for a rate reduction at the September meeting. An independent institution: Powell also discussed plans to revise capital requirements for banks to offset losses, highlighting the Fed's independence in making long-term decisions on interest rates and inflation. Insulating central banks from political pressures is crucial for effective policy-making. The upcoming consumer price index report and signs of cooling inflation have increased calls for rate cuts. Democratic senators have urged Powell to consider reducing rates to support economic stability and job growth.