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WASHINGTON: Continued progress on lowering inflation “is not assured” though the US Federal Reserve still expects to reduce its benchmark interest rate later this year, Fed Chair Jerome Powell said on Wednesday in comments to US lawmakers who will face price-weary voters in a charged presidential election year.

“If the economy evolves broadly as expected, it will likely be appropriate to begin dialing back policy restraint at some point this year,” Powell said in remarks prepared for delivery at a hearing before the House Financial Services Committee. “But the economic outlook is uncertain, and ongoing progress toward our 2% inflation objective is not assured.”

Powell’s opening remarks held close to the language he and his colleagues have used to characterize the current state of the economy and the consequential decision of when to start reducing interest rates as a rematch between incumbent President Joe Biden, a Democrat, and former Republican President Donald Trump takes shape.

He noted that inflation had “eased substantially” since hitting 40-year highs in 2022, and said there were risks of both cutting rates too soon and allowing inflation to reaccelerate, and of keeping monetary policy too tight for too long and damaging an ongoing economic expansion that has sustained a below 4% unemployment rate for two years.

But he also remained reluctant to say when monetary policy might ease, repeating that officials still need “greater confidence” in a continued decline of inflation before they reduce a benchmark rate of interest that has been held in the 5.25% to 5.5% range, the highest in more than 20 years, since July.

For the constituents of lawmakers conducting Wednesday’s hearing, that means interest rates for home mortgages, credit cards and small business loans will stay high, even as that tough monetary medicine helps relieve the high inflation that takes its own toll on firms and families, and has arguably contributed to Biden’s current low approval ratings.

Recent data has done little to clarify the direction of the economy and inflation, with some analysts projecting price pressures to steadily ease, others anticipating inflation will persist, and investors expecting rate cuts to start in June.

Powell “has been very measured in what he said about the overall health of the US economy. And from an inflationary standpoint, we’re not there yet,” said Phil Blancato, chief executive of Ladenburg Thalmann Asset Management in New York. “His comments are going to once again support the narratives that the Fed’s not ready to cut yet.”

The House hearing begins at 10 a.m. ET (1500 GMT), with a follow-on hearing before the Senate Banking Committee on Thursday.

Powell’s testimony comes at a time when inflation is now by some measures within striking distance of the Fed’s 2% target, but also as the economy remains unexpectedly strong.

Even as the Fed has kept its policy rate “restrictive,” overall financial conditions have been easing and asset prices rising on expectations of coming rate cuts, a dynamic that could make inflation harder to tame and bolster arguments for further delay.

Since the Fed’s Jan. 30-31 meeting, data has accumulated in a tit-for-tat fashion: Reports bolstering the soft-landing narrative, such as encouraging figures on services prices on Tuesday or signs of slowing consumer spending, have been counterbalanced by others showing inflation stuck in significant ways, such as from still-rising shelter costs, or evidence of unexpected economic strength, such as January’s outsized gain of more than 350,000 jobs. Powell has made a point as chair to cultivate ties with Democratic and Republican lawmakers. That has been aided by his reputation as a centrist with Republican roots who was named a Fed governor by former President Barack Obama, a Democrat, elevated to chair by Trump then given a second four-year term as chair by Biden.

While the deep US cultural divide over issues like abortion and immigration may dominate the campaign, the Fed’s decisions could determine whether the presidential vote occurs in an environment of low inflation, low unemployment and falling interest rates that typically favors an incumbent or in more challenging conditions. Members of a closely divided but Republican-controlled House all face voters in November. While only some members of the Democratic-led Senate panel are up for reelection, those include Chair Sherrod Brown of Ohio, who has already urged Powell to get rate cuts underway given the decline in inflation.

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