But despite making significant progress, inflation remains above the Fed's long-term target of two percent.
Meanwhile, the US jobs market has shown growing signs of softening in recent months, a key precondition for the Fed to contemplate an end to its cycle of monetary tightening.
«That was a helluva good week of data we got last week, and the key thing out of it is it's going to allow us to proceed carefully,» Fed governor Christopher Waller said in an interview with CNBC, referring in part to last week's jobs data.
«There’s nothing that is saying we need to do anything imminent any time soon, so we can just sit there, wait for the data, see if things continue,» he added.
Waller's comments follow a similarly cautious view to Fed Chair Jerome Powell, who told the Jackson Hole economic symposium in Wyoming at the end of August that the Fed would proceed «carefully» from now on.
Investors and analysts overwhelmingly expect the Fed to pause its hiking cycle at its next rate-setting meeting on September 19-20, while keeping the prospect of another hike later in the year alive.
Futures traders currently put the probability of a rate pause in September at 95 percent, and the chance of another hike in November at around 40 percent, according to data from CME Group.
On Tuesday Waller indicated the Fed should keep its options open in the months ahead.
«I don’t think one more hike would necessarily throw the economy into a recession if we did feel we needed to do one,» he told CNBC.