Federal Reserve Chair Jerome Powell said second quarter economic data has provided policymakers greater confidence that inflation is heading down to the central bank's 2% goal, possibly paving the way for near-term interest-rate cuts.

Powell pointed to the three latest inflation readings including the one from last week though made clear he didn't intend to send any specific message about the timing of rate reductions. 

"We didn't gain any additional confidence in the first quarter but the three readings in the second quarter, including the one from last week, do add somewhat to confidence," Powell said Monday during an interview with David Rubenstein at the Economic Club of Washington DC.

"Now that inflation has come down and the labor market has indeed cooled off, we're going to be looking at both mandates," he said. "They're in much better balance."

"That means that if we were to see an unexpected weakening in the labor market then that might also be a reason for a reaction by us," Powell added. 

The remarks cement a recent shift in tone among Powell and some Fed officials toward emphasizing potential risks to the labor market, alongside their continued focus on lowering inflation. While the US economy is adding jobs at a solid pace and unemployment is low, the labor market has shown signs of cooling. 

That trend, along with improving inflation data, has bolstered the case for the Fed to soon begin lowering its key policy rate. The Fed has held borrowing costs at the highest level in more than two decades for roughly a year. 

Source : Bloomberg