Market observers suggest that Federal Reserve rate cuts hinge critically on whether inflation continues to cool throughout the remainder of 2026. According to Seema Shah, Chief Global Strategist at Principal Asset Management, the current economic backdrop doesn't yet provide sufficient justification for the central bank to pursue near-term monetary easing. The resilience of employment remains a key consideration keeping policymakers cautious on rate reductions. However, as the price pressures stemming from tariff policies gradually fade into the background, economists anticipate that a second-half slowdown in inflation could eventually clear the path for more accommodative monetary policy. This potential shift underscores how deeply Fed decisions hinge on the trajectory of inflation, with market prices and yield curves already pricing in expectations for a policy pivot once inflationary headwinds subside.