WASHINGTON (AP) — Officials of the U.S. Federal Reserve have said they are increasingly confident that they Inflation almost curbed. Now it is about the health of the Job market this begins to make her uneasy.

With inflation cooling towards the 2% target, hiring slowing and Unemployment rate rises slightlyThe Fed is poised to cut its benchmark interest rate from a 23-year high next month. But how quickly it cuts rates after that will depend largely on whether employers continue to hire. A lower Fed rate would ultimately lead to lower interest rates on auto loans, mortgages, and other forms of consumer credit.

Chairman Jerome Powell will deliver a much-watched speech on Friday in Jackson Hole, Wyomingat the Fed annual conference of central bankersIt is a platform that Powell and his predecessors have often used to signal changes in their thinking or approach.

Powell will likely indicate that the Fed has increased confidence that inflation is heading back toward the 2 percent target, something the Fed has long said is necessary before starting to cut interest rates.

Economists generally agree that the Fed is getting closer to overcoming the high inflation that caused financial problems for millions of households three years ago as the economy recovered from the pandemic-induced recession. However, few economists believe Powell or any other Fed official is ready to declare that mission is “accomplished.”

“I don’t think the Fed has anything to fear from inflation,” said Tom Porcelli, chief U.S. economist at PGIM Fixed Income. “At this point, it’s right that the Fed is now focusing more on unemployment than inflation. Their policy is designed for inflation that is much higher than that.”

However, how quickly the Fed cuts interest rates in the coming months will depend on what the economic data shows. After the government reported this month that The number of new hires in July was much lower than expected and the unemployment rate reached 4.3%the highest level in three years, stock prices plunged for two days on fears that the US could enter a recession. Some economists were already speculating that the Fed would cut interest rates by half a percentage point in September and perhaps another cut of the same amount in November.

But last week’s economic reports, including a further decline in inflation and a sharp rise in Retail saleshave largely allayed those concerns. Wall Street traders now expect three quarter-percentage-point Fed rate cuts in September, November and December, with December being almost a gamble on whether the rate cut will be a quarter-percentage-point or a half-percentage-point. Mortgage rates have already started to fall in anticipation of a rate cut.

A half-percentage-point Fed rate cut in September would be more likely if there were signs of a further decline in hiring, some Fed officials said. The next jobs report will be released on Sept. 6, after the Jackson Hole conference but before the next Fed meeting in mid-September.

Raphael Bostic, president of the Fed’s Atlanta branch, said in an interview with the Associated Press on Monday that “signs of accelerating weakness in labor markets may justify a faster approach, either in terms of the gradual action or the speed with which we try to return to interest rates” that no longer constrain the economy.

Even if hiring remains stable, the Fed will cut interest rates this year as inflation rates are steadily rising, economists say. Last week, the government said consumer prices were rising. only 2.9% in July compared to the previous year, the smallest increase of its kind in more than three years.

Bostic pointed out that the economy has changed from a few months ago, when he said a rate cut might not be necessary until the last three months of the year.

“I am more confident that we will achieve our inflation target,” he said. “And we have seen that labor markets have weakened significantly compared to last year.” “We may need to change our policy stance sooner than I previously thought.”

Both Bostic and Austan Goolsbee, president of the Fed’s Chicago branch, say that when inflation falls, inflation-adjusted interest rates — which many companies and investors pay the most attention to — rise even though inflation has eased. When the Fed first set its benchmark interest rate at the current 5.3 percent, inflation — excluding volatile energy and food costs — was 4.7 percent. Now it’s just 3.2 percent.

“In such situations, our measures become more stringent with each passing moment,” Bostic said. “We have to worry” that interest rates are so high that they could cause an economic downturn.

Still, Bostic said the labor market and economy appear largely healthy at present and he still expects a “soft landing” in which inflation returns to the Fed’s 2 percent target without a recession.

With the economic outlook unclear and the Fed heavily focused on future data, Powell may not be able to say much about the central bank’s next steps on Friday.

Given the Fed’s focus on economic data, “it will be difficult for Powell to commit to a specific direction in advance at Jackson Hole,” said Matthew Luzzetti, Deutsche Bank’s chief U.S. economist, in a research note.