Jerome Powell is satisfied with the decline in inflation but won't cut rates just yet

Federal Reserve (Fed) Chairman Jerome Powell spoke at a global central banking forum in Sintra, Portugal and said that the latest inflation data indicates the nation's economy is "returning to a disinflationary path."

"We have made good progress and have brought inflation back to our target (...) The last reading and the one before it to a lesser extent, do suggest that we are getting back on a disinflationary path."

"Sustainable" inflation

Powell was pleased with the "progress" on inflation. However, he urged caution regarding changes to lowering interest rates and other factors that directly influence this data:.

"We're well aaware that if we go too soon, that we may undo the good work we've done (...) If we do it too late, we could unnecessarily undermine the recovery and the expansion."

The Federal Reserve announced last month that it would keep interest rates at 5.5% for another month. In May, inflation reports indicated a much softer than expected rise, so the market was waiting for a rate cut. The 12-month inflation for May was 3.3% compared to 3.4% the previous month.

The Fed is aiming for a 2% annual inflation rate as the ideal long-term level for the economy. At this point, it would begin to consider cutting interest rates:

"We want to be more confident that inflation is moving sustainably toward 2% before we begin the process of reducing or loosening policy."