Jerome H. Powell said the “balance of risks” across the economy had started to shift, raising the odds the central bank lowers borrowing costs at its next meeting in September.

Minutes after the speech, investors pegged the chances of a quarter-point interest rate cut at 91%, up from a 75% chance assessed one day earlier, according to CME FedWatch Tool, a measure of market sentiment. Despite the market's positive reaction to Powell's speech, the Fed chair voiced a note of caution for the outlook for the U.S. economy.

Federal Reserve chairman Jerome Powell signaled a possible interest rate cut in the months to come, sending stocks sharply higher.