The Federal Reserve has signaled two additional interest rate cuts in 2026, projecting the federal funds rate will reach 3.75-4.0% by year-end as inflation continues its gradual decline toward the 2% target.

Economic Outlook

Fed Chair Jerome Powell described the economy as in a "soft landing" with GDP growth at 2.1%, unemployment at 4.1%, and core inflation at 2.5%. The labor market remains resilient despite higher rates.

Market Reaction

Bond yields fell and stocks rallied on the news. The 10-year Treasury yield dropped to 3.8%, its lowest level in two years.