U.S. stocks advanced on Monday as traders increased their expectations that the Federal Reserve could start cutting interest rates later this year. The move followed softer-than-expected inflation readings last week, which reinforced bets that borrowing costs may soon ease.

Investors are now looking to the next round of inflation data for fresh clues on the health of the economy and the likely pace of policy changes. Any sign that price pressures are cooling further could strengthen the case for rate cuts, while a hotter reading may quickly reset those hopes.

The market’s latest gains reflect a broader shift in sentiment after months of uncertainty around interest rates, inflation, and growth. For now, traders appear more confident that the Fed has room to support the economy if disinflation continues.

Still, analysts caution that a single data point will not settle the outlook. The next inflation report is likely to shape expectations for the rest of the summer, with stocks, bonds, and the dollar all sensitive to what the numbers show.