Federal Reserve's Powell says US making 'modest' progress on inflation

Washington — The U.S. Federal Reserve is making "modest" progress in its inflation fight, the head of the U.S. central bank told lawmakers Tuesday, on the first of two days of testimony in Congress.

When prices surged in the wake of the COVID-19 pandemic, the Fed responded by hiking interest rates to a two-decade high as it attempts to cool down the U.S. economy and return inflation to its long-term target of two percent.

Inflation has eased significantly since it peaked in 2022, but progress stalled in the first quarter of this year, effectively putting the Fed's fight on pause.

The data in the second quarter has been more encouraging, prompting some cautious optimism from some policymakers in recent weeks.

Speaking in Washington on Tuesday, Fed Chair Jerome Powell told lawmakers on the Senate Banking Committee that the most recent readings "have shown some modest further progress" since the first quarter of the year.

"More good data would strengthen our confidence that inflation is moving sustainably toward two percent," he added, according to prepared remarks.

The Fed is widely expected to hold interest rates again when it meets to set interest rates later this month, but could begin cutting rates in September.

Futures traders have assigned a probability of more than 75% that the Fed will make its first rate cut by September.