Powell Signals Possible December Rate Cut as Inflation Cools

Federal Reserve Chair Jerome Powell signaled that a quarter-point interest rate cut in December is a realistic possibility, citing easing inflation pressures and continued strength in the labor market. His remarks came during an unscheduled question-and-answer session, catching markets off guard and reinforcing expectations that the central bank may soon begin to loosen policy.

Powell said recent data suggest inflation is moving in the right direction while job growth remains steady, giving policymakers room to consider a modest reduction in borrowing costs. Traders quickly adjusted their outlook after the comments, with fed funds futures now pricing in an 85% probability of a 25-basis-point cut at the Fed’s next meeting.

Financial markets reacted promptly to the shift in tone. The U.S. dollar index fell 0.4% to 103.8 as investors increased bets on easier monetary policy. The move reflected growing confidence that the Fed may be nearing the end of its tightening cycle, provided incoming data continue to support a softer inflation backdrop.

Powell’s comments were notable not only for their substance but also for their timing, as investors have been closely watching for clues about the central bank’s next move. While no decision has been made, his remarks strengthened expectations that the Fed could begin easing policy before year-end.