The Fed has made significant progress on inflation, but Powell believes more confidence is required before making any cuts.

Jerome Powell, the Federal Reserve Chair, expressed satisfaction with the progress made on inflation in the past year but stated that he needs to see more before he can confidently begin reducing interest rates.

Powell stated at a central banking forum in Sintra, Portugal that we have made significant progress in reducing inflation to our target.

The latest inflation reading and the previous one to a lesser extent suggest that we are moving back onto the disinflationary path. However, we need to be more confident that inflation is moving sustainably down towards 2% before we can start implementing policies of tightening or loosening.

Christine Lagarde and Roberto Campos Neto, in addition to Powell, spoke at a forum hosted by the ECB and moderated by CNBC's Sara Eisen.

Central banks, including the ECB, are gradually lowering interest rates as inflation indicators ease, and the Fed's actions are closely monitored by global markets.

The Fed's primary inflation indicator, the Commerce Department's personal consumption expenditures price index, decreased from a 2.6% 12-month rate in May to a lower level. Despite this, policymakers anticipate that it will take until 2026 for the index to reach their target of 2%.

Powell expressed concern about moving too quickly to combat inflation, as doing so could jeopardize the recent decline in price increases, which have been rising at their fastest pace since the early 1980s.

"He stated that if we act too early, we risk undoing the progress we've made, and if we act too late, we may unnecessarily harm the recovery and expansion."

This year, the balance between the risks of moving too late and too soon has improved due to the decrease in inflation, while the economy and labor market have remained stable. However, the Fed was concerned about cutting rates too soon and allowing inflation to resume its upward trend in the past year.

In the beginning of the year, markets predicted at least six Fed rate cuts of a quarter percentage point each. However, market pricing now anticipates only two cuts, one in September and another before the end of the year. Despite this, the rate-setting Federal Open Market Committee at their June meeting only forecasted one cut.

Powell stated that he wouldn't be providing any specific dates regarding the Fed's potential cut in September.

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