Federal Reserve Signals Possible Rate Cut as Inflation Cools to 2.1%
Fed Chair indicates the central bank is monitoring incoming data closely before making a decision at its July meeting.
Federal Reserve Chair Jerome Powell suggested Tuesday that the central bank may be approaching a pivot in its monetary policy, following new data showing inflation had eased to 2.1% — just above the Fed's 2% target.
Speaking at a press conference following the Federal Open Market Committee meeting, Powell said policymakers were "increasingly confident" that inflation was moving sustainably toward target, though he stopped short of committing to a timeline for rate reductions.
"We want to see a bit more data before we move," Powell said. "But the direction of travel is encouraging."
Markets reacted positively to the comments, with the S&P 500 rising 1.4% on the day and Treasury yields falling sharply. Futures markets now price in a roughly 72% probability of a quarter-point cut at the July FOMC meeting.
Economists cautioned that the labor market, which has remained resilient despite nearly two years of elevated rates, could complicate the Fed's calculus. A sustained drop in job openings data next week will be closely watched.