Inflation may keep Fed on hold until after Powell’s chair term ends

Inflation may not subside ‌quickly ​enough for Federal ‌Reserve Chair Jerome Powell to deliver another interest-rate ​cut before his term ends in May, with the Bureau of ‍Labor Statistics reporting consumer prices ​rose 2.7% in December from a year earlier, ​in line ⁠with economists’ expectations and well above the Fed’s target.

Traders see a June cut, after Powell is no longer chair, as the most likely timing, and continue to expect a total of ‌two rate cuts this year. Even so, interest-rate futures now ​reflect about ‌a 40% chance ‍of ⁠an April cut, up from 38% earlier. The report showed underlying consumer prices, excluding food and energy, rose a slightly less than expected 2.6%.

“A disinflationary trend is gradually taking shape,” said Seema Shah, chief global strategist at Principal Asset Management. “As tariff pass-through effects become ​clearer and inflation concerns ease, the Fed is likely to shift towards a stance where one or two more cuts can be justified.”

The data comes on the heels of an unprecedented move by the Trump administration to subpoena Powell in what the Fed chief said was a threat to the central bank’s ability to set interest rates based on its assessment of what the economy ​needs rather than what the president wants.

The Justice Department’s demand for information provoked an outcry from world central bankers as well as pushback from some key lawmakers in ​Trump’s Republican party.

U.S. ​stocks moved lower on Tuesday, led ‌by financials as JPMorgan shares declined and the bank cautioned that a planned ​cap on credit‑card rates could hurt the economy.

Data on U.S. consumer price increases in December was broadly in line ‍with forecasts, reinforcing traders’ bets on ​rate cuts this year. Headline and core CPI each rose 2.6% from a year earlier, the same ​pace as ⁠in November.

JPMorgan shares were down about 4%. A drop in investment banking fees overshadowed the company’s better-than-expected quarterly profit.

In addition, JPMorgan Chase CFO Jeremy Barnum said the bank believes that a proposed cap on credit card interest rates will adversely impact U.S. consumers and the economy, reviving a recent selloff in ‌some financials over U.S. President Donald Trump’s proposed one-year cap of 10% on credit card interest rates. ​Shares ‌of Visa and Mastercard fell.

The ‍S&P 500 banking ⁠index was down about 2.5%, while the financial sector was down 1.8%. Other big banks, due to report their quarterly numbers later this week, were also lower even as analysts expected most banks to post stronger results for the last quarter.

Delta Air Lines shares also were lower as the midpoint of its 2026 profit forecast fell short of analysts’ expectations.

The day’s declines most likely reflect “a little bit of letting the air out of the balloon,” ​after recent record highs, said Oliver Pursche, senior vice president, adviser for Wealthspire Advisors in Westport, Connecticut.

Earnings news overall will most likely be positive, he said, adding, “I suspect there are going to be some upward revisions.”

The Dow Jones Industrial Average fell 368.33 points, or 0.74%, to 49,222.38, the S&P 500 lost 26.82 points, or 0.38%, to 6,950.52 and the Nasdaq Composite lost 92.00 points, or 0.39%, to 23,641.91.

Investors have largely brushed off geopolitical flashpoints, from Washington’s saber-rattling in Iran to developments in Greenland and Venezuela.

They are also pricing in at least two more 25-basis-point interest rate cuts between June and December, with a small chance of a third, according ​to LSEG data.

Advancing issues outnumbered decliners by a 1.25-to-1 ratio on the NYSE. There were 512 new highs and 69 new lows on the NYSE.On the Nasdaq, 2,037 stocks rose and 2,601 fell as declining issues outnumbered advancers by a 1.28-to-1 ratio.