Markets pushed up their expectations for a Federal Reserve rate cut in September after fresh inflation data came in softer than economists had anticipated. The latest personal consumption expenditures index, a closely watched gauge of prices, suggested that price pressures are easing more quickly than many analysts expected.

The shift in pricing reflects growing confidence that the central bank may soon have room to lower borrowing costs, after a long stretch of tight monetary policy. Traders responded by assigning a higher probability to a cut, with investors watching incoming data for signs that inflation is moving sustainably toward the Fed’s target.

The report is likely to keep attention focused on whether the slowdown in inflation is broad enough to support a policy shift later this year. For households and businesses, a rate cut could eventually ease credit conditions, though the timing and pace of any change will depend on how the economy performs in the months ahead.

Still, officials have signaled that they want more than one encouraging reading before moving decisively. That means the next round of inflation, jobs and spending data will play a key role in shaping the Fed’s September decision.