The Federal Reserve sent its clearest signal yet that it may begin cutting interest rates in the coming months, as new data shows inflation continuing to moderate toward the central bank's 2% target.

In testimony before Congress, Fed Chair Jerome Powell said the central bank is "increasingly confident" that price pressures are easing sustainably, though he stopped short of committing to a specific timeline for rate cuts.

Market Reaction

Investors celebrated the news, with the S&P 500 climbing 1.8% to close at a new all-time high. The tech-heavy Nasdaq gained 2.3%, while the Dow Jones Industrial Average rose 450 points.

"This is exactly what the market wanted to hear," said Amanda Foster, senior market strategist at Morgan Stanley. "The Fed is signaling that the worst of the rate-hiking cycle is behind us."

Economic Outlook

The Fed's more dovish stance comes amid growing evidence that the economy is achieving a "soft landing" — slowing growth enough to tame inflation without triggering a recession.