Federal Reserve Chair Jerome Powell said the central bank is well positioned to begin cutting interest rates if inflation continues to move closer to the Fed’s 2% target, signaling a more dovish tone as price pressures cool. In remarks delivered on Monday, Powell pointed to recent progress in inflation data and suggested policymakers are increasingly confident that disinflation is taking hold.

The latest U.S. Consumer Price Index showed annual inflation at 2.5%, reinforcing expectations that the Fed’s preferred gauge, the core Personal Consumption Expenditures index, may also trend lower. While officials have not committed to a specific timeline, Powell’s comments were interpreted by investors as a sign that rate cuts could be approaching if incoming data remain favorable.

Financial markets responded positively to the remarks. S&P 500 futures rose 0.5% in early trading, reflecting hopes that lower borrowing costs could support economic growth and corporate earnings. Meanwhile, the yield on the 10-year Treasury note fell to 4.15%, indicating increased demand for government bonds as traders priced in a more accommodative policy outlook.

Powell’s message underscores the Fed’s balancing act: ensuring inflation returns sustainably to target without unnecessarily restraining the economy. For now, the central bank appears to be waiting for further confirmation that cooling inflation is durable before making its next move.

S&p 500 futures

Powell Signals Fed Could Cut Rates as Inflation Eases Toward Target