Fed's Powell says 'greater confidence' on falling prices still needed

The head of US central bank told lawmakers again on Tuesday that policymakers needed "greater confidence" that inflation was headed permanently lower before they could interest rates.

In remarks prepared for his semi-annual testimony before Congress, Jerome Powell also said that the risks towards the Fed's two goals of full employment and stable inflation were "coming into better balance".

So too, the jobs market was no longer "overheated" and the latest inflation data had improved modestly, having not done so at the start of the year.

"In the labor market, a broad set of indicators suggests that conditions have returned to about where they stood on the eve of the pandemic: strong, but not overheated."

"More good data" would boost its confidence that inflation was on a one way trip back to its 2% target, Powell said.

Nonetheless, in response to a question from one of the lawmakers, Powell said: "Today, I will not be sending any signals about" the timing of rate cuts.

The Fed chairman highlighted how non-farm payrolls had grown by 222,000 per month over the first half of the year, in part due to the "strong" pace of immigration.

Policymakers had the operational independence required to take a longer-term perspective in pursuing their dual mandate, he added.

Treasury head Janet Yellen, for her part, said in a separate hearing on Tuesday that the labour market was strong but now less of a source of inflationary concern.

She credited a surge in the supply of labour for the improvement.

In response to a question, Yellen also labelled former president Donald Trump's 2017 tax cuts as "costly" and "regressive".

Following Powell's remarks, Ryan Sweet, chief US economist at Oxford Economics, said: "We're increasingly confident in our forecast that the Fed will cut rates in September.

"But the path of interest rates is more uncertain than usual because the outcome of the presidential election will have a huge bearing on whether the central bank should continue to ease, pause, or even resume hiking."