WASHINGTON – The Federal Reserve announced Friday that it expects to cut interest rates by 0.5 percentage points in June, as inflation dropped to 2.1 percent, its lowest level in three years.

The central bank has maintained rates at 5.25-5.50 percent since July 2023, but recent economic data shows cooling price pressures across most sectors.

Chair Jerome Powell stated: The economy is moving toward a better balance. We believe the time for policy adjustment is approaching.

Wall Street reacted positively to the news, with the S&P 500 climbing 1.8 percent and the Nasdaq surging 2.3 percent to new record highs. The tech sector led gains, with Apple and Microsoft both rising over 3 percent.

Analysts expect the rate cut could boost housing market activity and reduce borrowing costs for consumers and businesses. However, some economists warn that premature cuts could reignite inflation pressures.

The European Central Bank and Bank of England are expected to follow similar dovish policies in the coming months.