“It is time for policy adjustment,” he said, noting that “upside risks to inflation have diminished and downside risks to employment have increased.”

Powell’s comments came after inflation fell to a three-year low of 2.9% in July and the unemployment rate rose to 4.3%, triggering a key recession indicator known as the Sahm rule.

After more than two years of focusing primarily on the price stability side of his dual mandate, Powell stressed that the Fed is now more aware of the rising risks to the labor market. “We do not seek or welcome further cooling in labor market conditions,” he said.

Looking ahead, Powell said the timing and pace of coming rate cuts will depend on incoming data, but he noted that “the direction we are going is clear.”

“We will do everything we can to support the strong labor market, while making further progress towards price stability with an appropriate policy rollback,” he said, adding that “there are good reasons to think the economy will return to 2% inflation, while we maintain a strong labor market.”

Stephen Brown, deputy chief economist for North America at Capital Economics, said the “unmistakably dovey” tone of Powell’s speech on Friday was a sign that a larger-than-forecast 50 basis point rate cut was now possible in September, at least if the unemployment rate rises further in August.

However, Brown argued that the rise in the unemployment rate in July was likely due to “temporary factors,” meaning that unless the August jobs report is dismal, a 25 basis point rate cut next month is the most likely outcome.

Are investors too optimistic?

Glen Smith, chief investment officer at GDS Wealth Management, also argued that a 25 basis point rate cut in September is now all but certain. He said that after Powell’s speech, it appears that the long-awaited and often ignored economic “soft landing” has finally arrived, with the Fed stepping in to support the economy. But how much support the Fed plans to provide remains to be seen.

“While a September rate cut is effectively a foregone conclusion at this point, the more important question is whether this will be a one-off rate cut, or whether it will be the start of a more substantial cycle of cuts, and that will be determined by the economic data over the next two to three months,” Smith said. Fortune via email.

When it comes to future policy easing beyond next month, Smith warned that markets may be overly enthusiastic. “We remind investors that the market has a history of being overly optimistic about rate cuts,” he said.

Brian Coulton, chief economist at Fitch Ratings, agreed. “There does not appear to be any serious concern about the risk of a looming recession and a wave of job losses, the kind of concern that would justify rapid rate cuts. Rather, it is the fading threat of high wage growth keeping inflation too high,” he said. Fortune via email. “The relaxation process after September will be gradual.”

Bond traders’ interest rate expectations in September didn’t change much after Powell’s press conference. The bond market had already priced in a 100% chance of a rate cut next month, including a 32.5% chance of a massive 50 basis point rate cut, according to CME Group’s FedWatch tool, and little changed after Powell’s speech.

The stock market certainly responded well to Powell’s dovish tone on Friday, however. The Dow Jones Industrial Average rose 1% by 11:45 a.m. ET, while the S&P 500 and the tech-heavy Nasdaq rose 0.85% and 1.1%, respectively.

Consumers, on the other hand, won’t benefit immediately from Powell’s upcoming rate cut. Ted Rossman, senior industry analyst at Bankrate, noted that the Fed will cut rates gradually, meaning it will take time to reduce most of the borrowing costs for consumers.

“We’ve already seen a significant decline in mortgage rates. The average 30-year fixed mortgage rate has fallen from about 8% in October of last year to 6.62% today. But that’s still high compared to the past two decades,” he said, adding: “We haven’t seen a significant decline in credit card or auto loan rates.”