Federal Reserve Chair Jerome Powell carefully opened the door to an interest-rate cut in September, pointing to rising risks for the labor market even as worries over inflation remain.

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.