Fed's Paulson (2026 Voter) says modest cuts are likely appropriate later this year if forecasts are met

• Inflation should be around 2% run rate by end of year. 
• Monetary Policy is a "little restrictive" right now. 
• Baseline economic outlook is ‘pretty benign’
• Cautiously optimistic on inflation moving back to target.
• Is seeking greater clarity on what’s driving job market in 2026. 
• US likely to grow around 2% this year.
• Expects inflation to moderate and job market to stabilize in 2026. 
• Job market is bending but not breaking right now.

Paulson's remarks indicate a potential shift towards modest rate cuts if inflation forecasts align, suggesting the Fed is balancing between easing policy and maintaining economic stability. The outlook of a benign economic environment and a projected inflation moderation could influence market expectations for the Fed's future rate path, particularly in relation to growth and job market conditions. This dovish sentiment may support a softer USD and attract interest in equities, while also impacting fixed income dynamics.