11:32 AM EDT, 08/23/2024 (MT Newswires) -- The "time has come" for the Federal Reserve's monetary policy committee to start lowering its benchmark lending rate, though the timing and extent of future policy easing will depend on incoming data, Chair Jerome Powell said Friday.

In a bid to combat inflation, the central bank's Federal Open Market Committee increased interest rates by 525 basis points from March 2022 through July 2023, but has since held monetary policy steady, with its latest pause coming late last month.

"The time has come for policy to adjust," Powell said at the Kansas City Fed-sponsored economic symposium in Jackson Hole, Wyoming. "The direction of travel is clear, and the timing and pace of rate cuts will depend on incoming data, the evolving outlook, and the balance of risks."

Powell said upside risks to inflation have "diminished."

US stock markets were rising intraday Friday, with the Nasdaq Composite, the S&P 500 and the Dow Jones Industrial Average gaining more than 1% each. All three benchmark indexes closed lower Thursday.

Inflation is now "much closer" to the FOMC's 2% target, with prices having increased 2.5% over the past year, Powell said. "My confidence has grown that inflation is on a sustainable path back to 2%."

On Wednesday, minutes from the FOMC's July 30-31 meeting showed that a "vast majority" of policymakers indicated at the time that a rate cut in September would likely be appropriate if new data continued to be in line with expectations.

Powell said Friday that the downside risks to employment have moved higher.

Official data released earlier this month showed the US economy added fewer jobs than projected in July, while the unemployment rate unexpectedly rose. The report triggered recession fears that have abated since then.

Powell said unemployment was rising largely because of "a substantial increase in the supply of workers and a slowdown from the previously frantic pace of hiring" instead of elevated layoffs, as is typically the case in a recession. The economy continues to expand at a "solid" rate, he added.

The labor market is not expected to be a source of heightened inflationary pressures "anytime soon," Powell said. "We do not seek or welcome further cooling in labor market conditions."

The odds of a 25-basis-point rate cut on Sept. 18 fell to roughly 66% Friday from 76% Thursday, while the probability of a more aggressive 50-basis-point reduction jumped to 34% from 24%, according to the CME FedWatch tool.

"While Chair Powell didn't give much in terms of the expected pace of cuts, it didn't seem like an oversized 50-basis-point cut is warranted at this time," TD Senior Economist James Orlando said in a Friday note to clients. The brokerage expects the FOMC to proceed with 25-basis-point cuts at each of its next three meetings scheduled for this year, according to the note.