Federal Reserve Chair Jerome Powell stated that more good data would boost confidence that the inflation rate is heading towards the Fed's 2% target, as recent data shows prices are moderating further.

Powell warned in his prepared testimony for a Senate hearing that raising rates too little or too late could put the economy and labor market at risk. He said inflation rising is not the only risk, and reducing policy accommodation too slowly or by too little could unnecessarily prolong the battle against inflation and allow unacceptably high inflation to become entrenched.

Powell's remarks suggest the FOMC is unlikely to cut rates at its meeting at the end of this month. US Treasuries yields fluctuated but trended higher, and the S&P 500 index maintained its gains after Powell's testimony was released.

Traders now see a slightly better than 70% chance of the Fed's first rate cut happening in September. They also expect two 25 basis point rate cuts in 2024.

Powell's comments indicate the Fed wants to see more convincing data before it feels confident enough to start cutting rates, keeping the market in an upbeat mood.