U.S. Fed has made 'quite a bit of progress' on inflation: Powell

The U.S. Federal Reserve has made "quite a bit of progress" in its fight against rising prices and could hit its inflation target as soon as next year, Fed chair Jerome Powell said Tuesday.

The U.S. central bank has hiked interest rates to a 23-year high as it looks to restrict monetary policy enough to bring inflation back down to its long-term two percent target without doing too much damage to either the labor market or the broader economy.

Since it started hiking rates in 2022, the Fed has brought inflation back down from a multi-decade high to an annual rate of 2.6 percent in May, while growth has remained positive and the unemployment rate has stayed at near-record lows.

"We've made quite a bit of progress in bringing inflation back down to our target, while the labor market has remained strong and growth has continued," Powell told an event in Sintra, Portugal, which was streamed online. "We want that process to continue."

He added that it was possible the Fed could hit its two percent target "maybe late next year," or in 2026.

"The main thing is, we're making real progress," he said.

At last month's interest rate decision, the Fed penciled in just one rate cut for this year, and said it does not expect inflation to reach two percent until 2026.

Futures traders currently believe there is a roughly 70 percent chance that the US central bank will start cutting interest rates by mid-September, and see it as more likely than not that it will make a second cut by the end of the year, according to CME Group data.

Powell was also asked about support for the Fed's independence during the discussion in Sintra with European Central Bank president Christine Lagarde and the head of Brazil's central bank, Roberto Campos Neto.

Donald Trump has repeatedly criticized Powell, whom he appointed, suggesting he may cut interest rates to support the Democrats ahead of November's presidential elections.

But Powell insisted Tuesday that the Fed was solely focused on doing its job under its dual mandate from Congress: to promote maximum employment and stable prices.

"I do think support for the Fed's independence is very high where it really matters on Capitol Hill, in both political parties," he said. "And so I worry about getting the job right."