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WASHINGTON (AP) — A sharp slowdown in hiring poses a growing risk to the U.S. economy, Federal Reserve Chair Jerome Powell said Tuesday, a sign that the Fed will likely cut its key interest rate twice more this year.

Powell said in a speech in Philadelphia that despite the federal government shutdown cutting off official economic data, “the outlook for employment and inflation does not appear to have changed much since our September meeting,” when the Fed reduced its key rate for the first time this year.

Fed officials at that meeting also forecast that the central bank would reduce its rate twice more this year and once in 2026. Lower rates from the Fed could reduce borrowing costs for mortgages, car loans, and business loans. Powell spoke before a meeting of the National Association of Business Economics.

Powell reiterated a message he first delivered after the September meeting, when he signaled that the Fed is slightly more worried about the job market than its other congressional mandate, which is to keep prices stable. Tariffs have lifted the Fed’s preferred measure of inflation to 2.9%, he said, but outside the duties there aren’t “broader inflationary pressures” that will keep prices high.

“Rising downside risks to employment have shifted our assessment of the balance of risks,” he said.

Economists said Powell’s remarks solidified expectations for further rate cuts, starting at its next meeting Oct. 28-29.

“While there was little doubt the (Fed) was angled to cut rates at its next meeting, today’s remarks were strong confirmation of that expectation,” Michael Feroli, chief U.S. economist at JPMorgan Chase, said in a note to clients.

Powell also said that the central bank may soon stop shrinking its roughly $6.6 trillion balance sheet. The Fed has been allowing roughly $40 billion of Treasuries and mortgage-backed securities to mature each month without replacing them.

“We may approach that point in coming months,” Powell said.

The shift could slightly lower borrowing costs over time. Economists at BMO Capital Markets estimated that the yields on Treasury securities ticked down slightly after Powell’s remarks.

Separately, Powell spent most of his speech defending the Fed’s practice of buying longer-term Treasury bonds and mortgage-backed securities in 2020 and 2021, which were intended to lower longer-term interest rates and support the economy during the pandemic.

Yet those purchases have come under a torrent of criticism from Treasury Secretary Scott Bessent, as well as some of the candidates floated by the Trump administration to replace Powell when his term as Chair ends next May.

Bessent said in an extended critique published earlier this year that the huge purchases of bonds during the pandemic worsened inequality by boosting the stock market, without providing noticeable benefits to the economy.

Other critics have long argued that the Fed kept implementing the purchases for too long, keeping interest rates low even as inflation began to spike in late 2021. The Fed beginning in 2021 stopped the purchases and then sharply boosted borrowing costs to combat inflation.

“With the clarity of hindsight, we could have—and perhaps should have—stopped asset purchases sooner,” Powell said. “Our real-time decisions were intended to serve as insurance against downside risk.”

Yet Powell said that moving earlier would not have prevented the COVID-era inflation spike: “Stopping sooner could have made some difference, but not likely enough to fundamentally alter the trajectory of the economy.”

Powell also said the purchases were intended to avoid a breakdown in the market for Treasury securities, which could have sent interest rates much higher.

The Fed chair also addressed a move by a bipartisan group of senators to stop the central bank from paying interest on the cash reserves banks park at the Fed. A measure to prevent the Fed from doing so was defeated in the Senate last week by the lopsided vote of 83-14.

Still, it garnered support from both parties, including Republican senators Rand Paul from Kentucky and Ted Cruz from Texas, as well as Massachusetts Democratic Sen. Elizabeth Warren.

Powell said that without the ability to pay interest on reserves, the Fed “would lose control over rates” and wouldn’t be able to carry out its mission. The Fed lifts the short-term interest rate it controls when it wants to cool borrowing and spending and slow inflation, while it cuts the rate to encourage borrowing, growth, and hiring.

Fox News, the former employer of Defense Secretary Pete Hegseth, has joined a near-unanimous outpouring of news organizations rejecting new rules for journalists based in the Pentagon.

Fox signed on to a statement with ABC, CBS, NBC and CNN saying they would not agree to Hegseth’s new rules, saying “the policy is without precedent and threatens core journalistic protections.” So far, only the conservative One America News Network has said its reporters would follow the new regulations.

Hegseth has said that outlets who don’t agree to the new rules by the end of Tuesday, which restrict reporting on news not specifically approved by his team, will be evicted from the Pentagon on Wednesday.

The Associated Press says it will not agree to the rules.

The Pentagon has said the rules establish “common sense media procedures” and want news outlets to sign a statement acknowledging them, even if they don’t agree with them. The news outlets have said that they are concerned, however, that their reporters will be subject to expulsion if they simply try to report news not approved by Hegseth.

The Pentagon’s new press policy undermines the First Amendment and AP’s core values as an independent global news organization," the AP said in its statement. “The restrictions impede the public’s access to information about their government and limit the people’s right to know. AP remains focused on continuing to produce strong independent coverage of the Pentagon in the public interest.”

The New York Times, Washington Post, Reuters, NPR and The Atlantic are among the other news outlets saying they won’t sign onto the new rules. Another conservative television network, Newsmax, has also rejected them.

OANN, through its founder Charles Herring, said that it has signed the document after a thorough review by its attorney.

The rejection by Fox, by far the most popular television outlet for fans of President Donald Trump, is a significant step. Hegseth worked as a weekend host at Fox before Trump selected him as his defense secretary. He’s one of several familiar Fox faces now working for Trump, including Transportation Secretary Sean Duffy and Jeanine Pirro, U.S. attorney for the District of Columbia.

The news organizations who have rejected the rules all say they will continue covering the U.S. military, even without being permitted on the Pentagon grounds. Barring a change from either side, the case looks to be headed for court.

The Pentagon Press Association, which represents dozens of reporters at the Pentagon, has said it wonders why it is even necessary for the Pentagon to proceed in this manner.

“Our members did nothing to create this disturbing situation,” the reporters’ group said in a statement Monday. “It arises from an entirely one-sided move by Pentagon officials apparently intent upon cutting the American public off from information they do not control and pre-approve.”

Since taking over at the Defense Department, Hegseth and his team have rarely conducted press briefings. They have moved to restrict the number of places reporters could go in the Pentagon without an official escort, and removed some reporters from long-established working spaces in the building.

Trump has fought news organization on several fronts in the past year. He has filed lawsuits against ABC News, CBS News, The New York Times and The Wall Street Journal, moved to choke off funding for government-funded news services like the Voice of America and Radio Free Europe/Radio Liberty, and is engaged in a court fight with the AP over access to presidential events.

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Associated Press reporter Laurie Kellman in London contributed to this report. David Bauder writes about the media for the AP. Follow him at http://x.com/dbauder and https://bsky.app/profile/dbauder.bsky.social