Federal Reserve officials signaled that interest rates could come down later this year after fresh data showed inflation moderating more than economists had expected. The update strengthened expectations that the central bank may soon shift toward easing after a long stretch of tighter policy.

The prospect of lower borrowing costs lifted hopes for consumers and homeowners, especially those waiting for relief on mortgages, credit cards, and other loans. Markets often respond quickly to any hint that the Fed may move away from its restrictive stance, and this report was no exception.

Even so, policymakers are likely to remain cautious. Inflation may be cooling, but the Fed has repeatedly stressed that it wants clear evidence that price pressures are under control before making any major change. That means the timing and size of any rate cut will depend on upcoming economic data.

For now, the latest figures give the central bank more room to consider easing later in the year. If that happens, households and businesses could see some relief from borrowing costs, though the Fed is expected to balance that against the risk of reigniting inflation.