The US economy’s strength and continued tight labor markets could warrant further Federal Reserve interest rate increases, Fed Chair Jerome Powell said on Thursday in remarks that appeared to push back against market expectations that the central bank’s rate hikes had reached an end.
“We are attentive to recent data showing the resilience of economic growth and demand for labor. Additional evidence of persistently above-trend growth, or that tightness in the labor market is no longer easing, could put further progress on inflation at risk and could warrant further tightening of monetary policy,” Powell said in remarks to the Economic Club of New York.
For inflation to durably return to the Fed’s 2% target, it “is likely to require a period of below-trend growth and some further softening in labor market conditions,” Powell said.
Since the Fed began raising interest rates in March of 2022 the unemployment rate has varied little from the current 3.8%, below the level most Fed officials feel is noninflationary, and overall economic growth has generally remained above the 1.8% annual growth rate Fed officials see as the economy’s underlying potential.
The Fed is “proceeding carefully” in evaluating the need for any further rate increases, Powell said, likely leaving intact current expectations that the Fed will leave its benchmark policy rate steady at the current 5.25% to 5.5% range at the upcoming Oct. 31-Nov. 1 meeting.
There is evidence the labor market is cooling, Powell said, with some important measures approaching levels seen even before the pandemic.
Powell also noted a number of fresh “uncertainties and risks” that need to be accounted for as the Fed tries to balance the threat of allowing inflation to rekindle against the threat of leaning on the economy more than is necessary.
Those include new geopolitical risks to the economy from the “horrifying” attack on Israel by the Palestinian militant Hamas group, Powell said.
“Our institutional role at the Federal Reserve is to monitor these developments for their economic implications, which remain highly uncertain,” Powell said. “Speaking for myself, I found the attack on Israel horrifying, as is the prospect for more loss of innocent lives.”
He also noted recent market-driven increases in bond yields that have helped to “significantly” tighten overall financial conditions.
“Persistent changes in financial conditions can have implications for the path of monetary policy,” Powell said, with higher market-based interest rates, if sustained, doing the same job as Fed rate increases.
But the Fed chair also voiced what has become a lingering theme at the central bank: That despite steady progress on lowering inflation, the battle isn’t over, with further rate increases still a possibility and the duration of tight monetary conditions still to be determined.
“Inflation is still too high, and a few months of good data are only the beginning of what it will take to build confidence that inflation is moving down sustainably toward our goal,” Powell said, citing the progress made since inflation peaked last year but also noting that one of the Fed’s main measures of inflation remained at 3.7% through September, nearly twice the central bank’s target.
“We cannot yet know how long these lower readings will persist, or where inflation will settle over coming quarters,” Powell said. “The path is likely to be bumpy and take some time…My colleagues and I are united in our commitment to bringing inflation down sustainably to 2%.”
The weeks since the Fed’s September meeting have been unusually turbulent, with worries about regional war in the Middle East rising and bond markets driving market interest rates higher, tightening the financial conditions faced by businesses and households somewhat independent of the Fed.
Data since the Fed’s last meeting also has shown US job growth reaccelerating unexpectedly, retail sales defying predictions of a slowdown and varying measures of prices offering inconsistent signals about whether inflation is on track to return to the Fed’s 2% target in a timely manner.
Powell’s appearance comes less than 48 hours before the beginning of the traditional quiet period ahead of the rate-setting Federal Open Market Committee’s meeting on Oct. 31-Nov. 1. While a handful of other Fed officials have appearances later on Thursday and Friday before blackout begins on Saturday, it is Powell’s remarks that will set the tone for policy expectations heading into that meeting.
Should they leave rates unchanged in two weeks as is now widely expected, it would mark the first back-to-back meetings with no rate increase since the Fed kicked off its hiking campaign in March 2022.
A Reuters poll of more than 100 economists published on Wednesday showed more than 80% expect no rate hike at the next meeting, and most also believe the Fed is done with rate hikes even though a majority of policymakers at their September meeting projected one more quarter-point increase was likely to be needed by year end.
Many in the poll offered the caveat that if progress on inflation stalls out or reverses, the Fed would not hesitate to resume raising rates.
It is “shameful” that black boys growing up in London are “far more likely” to die than white boys, Metropolitan Police chief Sir Mark Rowley has told Sky News.
In a wide-ranging interview with Sunday Morning with Trevor Phillips, the commissioner saidthat relations with minority communities are “difficult for us”, while also speaking about the state of the justice system and the size of the police force.
Sir Mark, who came out of retirement to become head of the UK’s largest police force in 2022, said: “We can’t pretend otherwise that we’ve got a history between policing and black communities where policing has got a lot wrong.
“And we get a lot more right today, but we do still make mistakes. That’s not in doubt. I’m being as relentless in that as it can be.”
He said the “vast majority” of the force are “good people”.
However, he added: “But that legacy, combined with the tragedy that some of this crime falls most heavily in black communities, that creates a real problem because the legacy creates concern.”
Sir Mark, who also leads the UK’s counter-terrorism policing, said black boys growing up in London “are far more likely to be dead by the time they’re 18” than white boys.
“That’s, I think, shameful for the city,” he admitted.
“The challenge for us is, as we reach in to tackle those issues, that confrontation that comes from that reaching in, whether it’s stop and search on the streets or the sort of operations you seek.
“The danger is that’s landing in an environment with less trust.
“And that makes it even harder. But the people who win out of that [are] all of the criminals.”
Image: Met Police Commissioner Sir Mark Rowley
The commissioner added: “I’m so determined to find a way to get past this because if policing in black communities can find a way to confront these issues, together we can give black boys growing up in London equal life chances to white boys, which is not what we’re seeing at the moment.
“And it’s not simply about policing, is it?”
Sir Mark said: “I think black boys are several times more likely to be excluded from school, for example, than white boys.
“And there are multiple issues layered on top of each other that feed into disproportionality.”
‘We’re stretched, but there’s hope and determination’
Sir Mark said the Met is a “stretched service” but people who call 999 can expect an officer to attend.
“If you are in the middle of the crisis and something awful is happening and you dial 999, officers will get there really quickly,” Sir Mark said.
“I don’t pretend we’re not a stretched service.
“We are smaller than I think we ought to be, but I don’t want to give a sort of message of a lack of hope or a lack of determination.”
“I’ve seen the mayor and the home secretary fighting hard for police resourcing,” he added.
“It’s not what I’d want it to be, but it’s better than it might be without their efforts.”
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How police tracked and chased suspected phone thief
‘Close to broken’ justice system ‘frustrating’ and ‘stressed’
Sir Mark said the criminal justice system was “close to broken” and can be “frustrating” for others.
“The thing that is frustrating is that the system – and no system can be perfect – but when the system hasn’t managed to turn that person’s life around and get them on the straight and narrow, and it just becomes a revolving door,” he said.
“When that happens, of course that’s frustrating for officers.
“So the more successful prisons and probation can be in terms of getting people onto a law-abiding life from the path they’re on, the better.
“But that is a real challenge. I mean, we’re talking just after Sir Brian Leveson put his report out about the close-to-broken criminal justice system.
“And it’s absolutely vital that those repairs and reforms that he’s talking about happen really quickly, because the system is now so stressed.”
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She pinned the primary blame for the Met’s culture on its past leadership and found stop and search and the use of force against black people was excessive.
At the time, Sir Mark, who had been commissioner for six months when the report was published, said he would not use the labels of institutionally racist, institutionally misogynistic and institutionally homophobic, which Baroness Casey insisted the Met deserved.
However, London Mayor Sadiq Khan, who helped hire Sir Mark – and could fire him – made it clear the commissioner agreed with Baroness Casey’s verdict.
A few months after the report, Sir Mark launched a two-year £366m plan to overhaul the Met, including increased emphasis on neighbourhood policing to rebuild public trust and plans to recruit 500 more community support officers and an extra 565 people to work with teams investigating domestic violence, sexual offences and child sexual abuse and exploitation.
Watch the full interview on Sunday Morning with Trevor Phillips from 8.30am on Sunday.
Labour’s largest union donor, Unite, has voted to suspend Deputy Prime Minister Angela Rayner over her role in the Birmingham bin strike row.
Members of the trade union, one of the UK’s largest, also “overwhelmingly” voted to “re-examine its relationship” with Labour over the issue.
They said Ms Rayner, who is also housing, communities and local government secretary, Birmingham Council’s leader, John Cotton, and other Labour councillors had been suspended for “bringing the union into disrepute”.
There was confusion over Ms Rayner’s membership of Unite, with her office having said she was no longer a member and resigned months ago and therefore could not be suspended.
But Unite said she was registered as a member. Parliament’s latest register of interests had her down as a member in May.
The union said an emergency motion was put to members at its policy conference in Brighton on Friday.
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Unite is one of the Labour Party’s largest union donors, donating £414,610 in the first quarter of 2025 – the highest amount in that period by a union, company or individual.
The union condemned Birmingham’s Labour council and the government for “attacking the bin workers”.
Mountains of rubbish have been piling up in the city since January after workers first went on strike over changes to their pay, with all-out strike action starting in March. An agreement has still not been made.
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Ms Rayner and the councillors had their membership suspended for “effectively firing and rehiring the workers, who are striking over pay cuts of up to £8,000”, the union added.
‘Missing in action’
General secretary Sharon Graham told Sky News on Saturday morning: “Angela Rayner, who has the power to solve this dispute, has been missing in action, has not been involved, is refusing to come to the table.”
She had earlier said: “Unite is crystal clear, it will call out bad employers regardless of the colour of their rosette.
“Angela Rayner has had every opportunity to intervene and resolve this dispute but has instead backed a rogue council that has peddled lies and smeared its workers fighting huge pay cuts.
“The disgraceful actions of the government and a so-called Labour council, is essentially fire and rehire and makes a joke of the Employment Relations Act promises.
“People up and down the country are asking whose side is the Labour government on and coming up with the answer not workers.”
Image: Piles of rubbish built up around Birmingham because of the strike over pay
Sir Keir Starmer’s spokesman said the government’s “priority is and always has been the residents of Birmingham”.
He said the decision by Unite workers to go on strike had “caused disruption” to the city.
“We’ve worked to clean up streets and remain in close contact with the council […] as we support its recovery,” he added.
A total of 800 Unite delegates voted on the motion.
Nearly 60 Labour MPs have called on David Lammy and the Foreign Office to immediately recognise Palestine as a state.
A mix of centrist and left-wing MPs, including some committee chairs, wrote to the foreign secretary this week to say “by not recognising [Palestine] as a state, we undermine our own policy of a two-state solution and set an expectation that the status quo can continue and see the effective erasure and annexation of Palestinian territory”.
The 59 MPs suggest the government pursue five different measures to prevent the Israeli government from carrying out its Rafah plan, adding that they believed Gaza was being “ethnically cleansed” – a claim vehemently denied by Israel.
The letter was organised by Labour Friends of Palestine and the Middle East group.
Image: Palestinians ask for food from a charity kitchen in Gaza on 7 July. Pic: Reuters
It states that the Israeli plan, which would see the “population transfer to the southern tip of Gaza in preparation for deportation outside the strip”, is an accurate description, but that they believe a clearer way to describe it is the “ethnic cleansing of Gaza”.
Israeli officials have said they want to separate the civilian population from Hamas, which still controls parts of Gaza and holds dozens of hostages abducted in the October 7 attack that triggered the war 21 months ago.
Emmanuel Macron discussed recognising Palestine as a state at a joint news conference with Sir Keir Starmer on Thursday – the same day the letter was signed.
The French president said: “Today, working together in order to recognise the state of Palestine and to initiate this political momentum is the only path to peace.”
While France has not yet recognised a Palestinian state yet, Norway, Ireland and Spain coordinated their recognition last year.
The letter demands ministers take five different measures to:
• Recognise the state of Palestine • Continue support for the UN Agency for Palestinian Refugees (UNRWA) • Secure the release of hostages • Press for the full and unhindered resumption of humanitarian aid • Fully review and place restrictions on trade with and financial support of illegal Israeli settlements in the West Bank
The government says it is already providing funding for the UNRWA and working to secure the release of hostages held by Hamas, but immediate recognition of Palestinian statehood will be a much more controversial move.
Sky News understands this is the second time MPs have formally called on the government to immediately recognise the state of Palestine, with previous letters signed by some parliamentary aides and even junior ministers.
Ministers have indicated their plan to recognise Palestine would be “at a time that is most conducive to the peace process” without further clarity of when that might be.
They have also indicated that it would not be suitable to speculate about future sanctions, as this could reduce their impact.
A Foreign Office spokesperson said: “Since day one, this government has been clear that we need to see an immediate ceasefire, the release of all hostages cruelly detained by Hamas, better protection of civilians, much-needed food aid, medicines, shelter and other supplies immediately being allowed to enter Gaza, and a path to long-term peace and stability.
“The situation on the ground in Gaza is horrendous – for the hostages and for Palestinians – and we urgently want to see a deal done, to end the suffering on all sides.
“We are committed to recognising a Palestinian state and to doing so when will have most impact in support of a peace process. We continue to provide lifesaving aid to supporting Palestinians in Gaza and the West Bank, and to work closely in support of the Palestinian Authority.”