Traders increased their expectations for a Federal Reserve rate cut after new inflation data showed price growth easing in June. The latest consumer price index rose 2.6% from a year earlier, a sign that inflation pressures may be moderating after a period of tighter borrowing conditions.

The softer reading gave markets fresh reason to think the central bank could begin lowering rates later this year. Investors often treat cooler inflation as a step toward easier monetary policy, since it can reduce the urgency for the Fed to keep rates elevated.

Lower-rate expectations can matter quickly for households and businesses. If the Fed moves to cut borrowing costs, consumers could eventually see some relief on mortgages, credit cards, auto loans and other forms of debt, though any changes would depend on the pace of future economic data.

Still, one month of softer inflation does not guarantee an imminent policy shift. Fed officials have said they will continue to weigh incoming data before deciding whether conditions are stable enough to ease policy further.