More data needed to prove inflation is falling, says Fed chair

Federal Reserve Chair Jerome Powell said Wednesday that more macroeconomic data is needed to prove inflation is falling.

"It will take substantially more evidence to give confidence that inflation is on a sustained downward path," said Powell, adding price pressures "remain evident."

Powell spoke at a news conference after the central bank's two-day meeting following a rate increase of 50 basis points, carrying the federal funds rate to between 4.25% and 4.5% -- its highest in 15 years.

"Russia's war against Ukraine has boosted prices for energy and food, and has contributed to upper pressure on inflation," he said. "The longer the current bout of high inflation continues, the greater the chance that expectations of higher inflation will become entrenched."

Powell stressed that restoring price stability is essential to achieve maximum employment and stable prices in the long run.

He warned that historical record cautions against prematurely loosening monetary policy, and added: "We will stay on the course (of lowering inflation) until the job is done."

Powell said the Fed's actions are not on short-term moves but on "persistence moves" and more rate hikes will follow.

"Now we have raised 425 basis points this year. It is not important how fast we go, it is far more important to think what is the ultimate level," he said, adding that the ultimate question will be how long the Fed will remain restrictive in its monetary policy.

He said the question of how high interest rates ultimately will be based on looking at inflation, financial conditions and assessments on whether the Fed's policy rate is restrictive enough.

"I've told you today that we have an assessment that we are not restrictive enough in stance even with today's move,” he said. “At a certain point we will get to that point, and then the question will be how long do we stay there.”

Powell noted that inflation can be broken down into three levels -- goods inflation, housing services and non-housing related core services that make up 55% of the personal consumption expenditures index.