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In his statements to Congress, Powell also suggested that the arguments for interest rate cuts are becoming stronger.

The United States “is no longer an overheated economy” with a labor market that has “cooled considerably” from the extremes of the pandemic era and, in many ways, has returned to where it was before the health crisis, Federal Reserve Chairman Jerome Powell said on Tuesday.

In his remarks to Congress, Powell also suggested that the arguments for interest rate cuts are becoming stronger.

“We are very aware that we face two-sided risks,” and we can no longer focus solely on inflation, which, however, still “remains above” the central bank’s 2% target, Powell told the Senate Banking Committee on Tuesday. “The labor market seems to have returned to a state of full balance.”

In his prepared comments, Powell told senators that inflation had been improving in recent months and that “more good data would reinforce” the arguments for a more relaxed monetary policy.

The Federal Reserve has kept its policy rate in the range of 5.25% to 5.5% since July 2023.

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Powell’s comments seemed to show increasing confidence that inflation will return to the central bank’s target, contrasting the lack of progress in the early months of the year with recent improvements that have helped bolster the Federal Reserve’s confidence that price pressures will continue to slow down.

“After a lack of progress towards our 2% inflation target earlier this year, the most recent monthly measurements have shown more modest advances,” Powell said in remarks before the Senate Banking Committee. “More good data would strengthen our confidence that inflation is moving sustainably towards 2%,” he added.

The Fed will receive information on consumer prices for June on Thursday.

A jobs report on Friday showed a still-solid figure of 206,000 jobs added in June but with a slowing monthly trend and an unemployment rate now rising to 4.1 percent.