By Michael MacKenzie, Elena Popina, and Liz Capo McCormick
A key question for investors this week is whether Federal Reserve officials push back against market bets on a series of interest-rate cuts extending into next year.
A quarter-point reduction is seen as a sure thing when the Fed announces its policy decision Wednesday, with a small potential for a half-point move amid signs US job growth is slowing rapidly. But markets have also priced in reductions continuing deep into 2026 to ward off a recession.
That assumption has driven Treasury yields to the lowest in months, propelled US stocks to record highs and undermined the dollar.
The risk to those wagers is that Fed Chair Jerome Powell and his colleagues signal that investors have gotten ahead of themselves with inflation stubbornly above the central bank’s target and the impact of tariffs still playing out on prices. That backdrop is amping up scrutiny of Powell’s remarks and officials’ rate projections — the so-called dot plot — to assess whether the Fed plans a more cautious approach on easing policy.
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