Federal Reserve Chair Jerome Powell warned a recent uptick of inflation, alongside a hiring slowdown, poses a “challenging situation” for central bankers as they aim to steer the U.S. economy through a “turbulent period.”

The Fed, which opted to cut interest rates last week, is guided by a dual mandate to keep inflation under control and maximize employment. Speaking at the Greater Providence Chamber of Commerce, in Providence, Rhode Island, on Tuesday, Powell said a sharp cooldown of hiring over the summer had shifted the balance of risks toward greater concern over the labor market.

“The downside risks to employment have risen,” Powell said.

The remarks came days after the Fed cut interest rates for the first time this year in an effort to boost hiring. ​​The Federal Open Market Committee (FOMC), a policymaking body at the Fed, projected two additional quarter-point rate cuts over the remainder of 2025.

Still, Powell voiced concern about the trajectory for prices, saying “uncertainty around the path of inflation remains high.”

“Two-sided risk mean there is no-risk free path,” Powell added.

The central bank last week delivered a policy long-sought by President Donald Trump, though the size of the rate cut fell short of a larger reduction preferred by Trump.

The announcement marked a flashpoint in the monthslong pressure campaign directed at the Fed by Trump.

In recent weeks, Trump has moved to fire one member of the Fed’s board of governors and secure Senate confirmation for another. Both officials were among the 12 policymakers who cast votes on the interest-rate decision, though their status remained uncertain days before the Fed meeting.

The race to reshape the Fed comes after Trump railed for months against the central bank and Powell for declining to heed his call for lower interest rates. Last week, Powell said the Fed remains “strongly committed to maintaining our independence.”

Stephen Miran, a top White House economic advisor who joined the Fed board last week, cast the lone dissenting vote. Miran voted in favor of a larger half-point rate cut.

Trump recently moved to fire board member Lisa Cook, who sued Trump over her attempted ouster, saying the decision violated her legal protections as an employee at the independent federal agency. Trump said he removed Cook over mortgage fraud allegations against her, which Cook has denied.

Last week, a federal judge issued a preliminary injunction requiring the Fed to let Cook continue serving in her role as a governor of the Federal Reserve System as her lawsuit moves through the courts. The Trump administration appealed the ruling to the Supreme Court.

In recent months, the economy has suffered a sharp hiring slowdown alongside a rise of inflation, setting the conditions for what economists call “stagflation.”

The economic conditions have put Fed policymakers in a bind. If the Fed raises interest rates as a means of protecting against tariff-induced inflation, it risks tipping the economy into a downturn. On the other hand, if the Fed lowers rates to stimulate the economy in the face of a hiring slowdown, it threatens to boost spending and worsen inflation.