The Federal Reserve has signaled a potential shift in its monetary policy stance, suggesting that interest rate cuts could be on the table as early as the second quarter of 2026. Fed Chair Jerome Powell noted that recent economic data shows inflation trending toward the 2% target, giving the central bank room to consider easing.
"We are encouraged by the sustained progress on inflation," Powell said during a press conference following the latest FOMC meeting. "While we remain data-dependent, the conditions for a policy adjustment are becoming more favorable."
Markets reacted positively to the news, with major indices posting gains. The S&P 500 rose 1.2% and the Nasdaq climbed 1.5% on the announcement. Bond yields fell as investors priced in the likelihood of lower rates.
Economists warn that the path forward is not without risks. Geopolitical tensions and potential supply chain disruptions could reignite inflationary pressures, complicating the Fed's timeline for rate adjustments.
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