The Federal Reserve has signaled a potential shift in monetary policy after three consecutive months of declining inflation data, raising expectations of interest rate cuts in the coming quarters.
Fed Chair Jerome Powell stated in prepared remarks that “the balance of risks has shifted” and that the central bank is now “equally attentive to both sides of our dual mandate.”
Markets reacted swiftly, with Treasury yields falling across the curve and stock futures jumping in after-hours trading. The CME FedWatch tool now shows a 78% probability of a rate cut at the next meeting.
However, several Fed governors have urged caution, noting that services inflation remains elevated and that premature easing could reignite price pressures.
Economists are divided on the timing, with some advocating for immediate action and others suggesting a more gradual approach to ensure inflation is sustainably returning to the 2% target.
