Watch Live: Powell delivers his remarks after the Fed’s interest rate meeting

WASHINGTON (AP) — The Federal Reserve is almost certain to cut its key interest rate on Wednesday and could signal it expects another cut in December as the central bank seeks to boost hiring.

Federal Reserve Chairman Jerome Powell is scheduled to speak at 2:30 p.m. ET. Watch in the player above.

Wednesday’s cut will be the second this year and could benefit consumers by lowering borrowing costs for mortgages and auto loans. Since Federal Reserve Chairman Jerome Powell strongly signaled in late August that interest rate cuts were likely this year, the average 30-year mortgage interest rate has fallen to about 6.2% from 6.6%, providing a boost to the sluggish housing market.

However, the Fed is going through an unusual period for the US economy, and its future movements are more difficult to predict than is usually the case. Hiring has almost stopped, but inflation remains high, and strong economic growth often depends heavily on huge investments by leading technology companies in AI infrastructure.

The central bank assesses these trends without using most of the government data it uses to measure the health of the economy. The release of the September jobs report was delayed due to the government shutdown. The White House said last week that October inflation numbers may not be compiled.

The lockdown itself may also cripple the economy in the coming months, depending on how long it lasts. Nearly 750,000 federal workers are approaching a month without pay, which could soon begin to dampen consumer spending, a critical driver of the economy.

Federal workers laid off by the Trump administration’s government efficiency efforts earlier this year may officially appear in jobs data if they are reported next month, which could make monthly employment data look worse.

Powell said the risk of weak employment is rising, making it as much of a concern as inflation, which remains high. As a result, the central bank needs to move its key interest rate closer to a level that will neither slow down nor stimulate the economy.

Most Fed officials view the current level of the key interest rate – 4.1% – as high enough to slow growth and cool inflation, which has been their main goal since rate increases soared to their highest level in four decades three years ago. The Fed is widely expected to cut it to around 3.9% on Wednesday. With job gains at risk, the goal is to move interest rates to a less restrictive level.

Chris Dawsey, head of economic research at investment bank DE Shaw, said the lack of data during the lockdown means the Fed is likely to stay on the path it charted in September, when it forecast cuts this month and in December.

“Imagine you are driving through a winter storm and suddenly lose your vision in blackout conditions,” Dawsey said. “As you slow the car down, you’re going to keep going in the direction you were going versus making a sudden change once you lose that vision.”

In his recent statements, the Federal Reserve Chairman made it clear that the slowdown in the labor market has become a major concern.

“The job market has already declined significantly,” Powell said. “It appears that downside risks to employment have risen.”

Before the government shutdown cut off data flows on October 1, monthly employment gains had weakened to an average of just 29,000 per month over the previous three months. The unemployment rate rose to a low of 4.3% in August from 4.2% in July.

However, layoffs remain low, prompting Powell and other officials to refer to a “low-employment, low-employment” labor market.

Meanwhile, last week’s inflation report – released more than a week late due to the lockdown – showed that inflation remains high but is not accelerating and may not need higher rates to tame it.

However, the key question is how long the labor market can remain within what Powell described as a “strange kind of equilibrium.”

“There have been some worrying data points in the last few months,” said Stephen Stanley, chief U.S. economist at Santander investment bank. “Is this a weak trend or are we hitting an air pocket?”

The uncertainty has prompted some senior Fed officials to signal that they may not necessarily support a cut at its next meeting in December. At its September meeting, the Fed indicated it would cut interest rates three times this year, although its policy-making committee was divided. Nine of 19 officials supported two or fewer cuts.

Christopher Waller, a Fed board member and one of five people the Trump administration is considering to replace Powell as Fed chairman next year, said in a recent speech that although employment data is weak, other numbers suggest the economy is growing at a healthy pace.

“So, something’s got to give,” Waller said. “Either economic growth declines to match a soft labor market, or the labor market rebounds to match stronger economic growth.”

Waller added that since it is unclear how the discrepancy will develop, “we need to move cautiously when adjusting the interest rate.”

Waller said he supports a quarter-point cut this month, “but beyond that point” it will depend on what the economic data says, assuming the lockdown ends.

Financial markets have put the odds of another cut in December at more than 90%, according to CME Fedwatch — and Fed officials have so far said little to defuse those expectations.

Jonathan Pingel, chief U.S. economist at UBS, said he would look to see if Powell would reiterate in a news conference on Wednesday his assertion that the risks of labor market weakness remain high.

“If I hear that, I think they’re going to cut rates again in December,” he said.