Federal Reserve Chair Jerome Powell said a September interest rate cut remains possible if inflation continues to ease, reinforcing investor expectations that the central bank could soon begin trimming borrowing costs.

The comments came as recent data suggested price pressures are moderating, giving policymakers more room to consider a shift after a long stretch of restrictive monetary policy. Markets reacted by assigning a stronger chance to an easing move at the next Fed meeting.

A rate cut would be watched closely by borrowers, homebuyers and businesses, since lower benchmark rates can filter through to mortgages, credit cards and corporate financing. Still, Fed officials have signaled they will want more evidence that inflation is moving sustainably toward target before making a final decision.

The September meeting is now shaping up as a key test of whether cooling inflation is enough to persuade the central bank to start loosening policy without risking a renewed price spike.