Federal Reserve Chair Jerome Powell delivered a cautious and sobering message to markets on Thursday, signaling that the central bank’s fight against inflation requires “continued vigilance” and explicitly dampening growing expectations for significant interest rate cuts in early 2026.

Speaking at the Annual Economic Symposium, Powell acknowledged the progress made in cooling price pressures over the last year but warned that the “final mile” of returning to the Fed’s 2% inflation target remains the most difficult.

“We are encouraged by the moderation in recent inflation data, but we are not yet convinced that the job is done,” Powell stated in his prepared remarks. “The data remains volatile, and core services inflation, excluding housing, is still running higher than we are comfortable with. We must remain resolute.”

The comments immediately sent ripples through financial markets, which had been pricing in a more “dovish” pivot from the central bank. The S&P 500 fell 1.5% in morning trading, and yields on 10-year Treasury notes jumped back above 4.3% as investors recalibrated their expectations.

Powell’s stance puts pressure on both Wall Street and Main Street. For consumers, this signals that relief from high borrowing costs particularly for mortgages and auto loans may not be coming as quickly as hoped. For the White House, it complicates the economic narrative heading into a sensitive post-election transition period.

While Powell did not rule out rate cuts next year, he emphasized that any such decisions would be “entirely data-dependent” and not based on a preset timeline. “To cut rates prematurely would risk undoing the hard-won progress we have made,” he concluded. “A period of restrictive policy must be maintained for as long as it takes to ensure price stability is fully restored.”

The Fed’s next policy meeting is scheduled for mid-December, which will be closely watched for any changes to their economic projections.