Federal Reserve Chair Jerome Powell said the US central bank needs to be patient as it awaits more evidence that high interest rates are curbing inflation, doubling-down on the need to keep borrowing costs elevated for longer.

Powell said that he expects inflation will move lower on a monthly basis, but price figures in the first quarter have tempered his confidence. He described current policy as restrictive by many measures but noted time will tell if policy is sufficiently restrictive to bring inflation back to the Fed’s 2% target. 

“The first quarter in the United States was notable for its lack of further progress on inflation,” Powell said Tuesday during an event hosted by the Foreign Bankers’ Association in Amsterdam. “We did not expect this to be a smooth road, but these were higher than I think anybody expected.”

“What that has told us is that we’ll need to be patient and let restrictive policy do its work,” he added.

During the moderated discussion between Powell and European Central Bank Governing Council member Klaas Knot, the Fed chief reiterated it wasn’t likely that the Fed’s next move will be a rate hike. Powell added it’s more likely that the Fed will just keep the policy rate where it is.

US central bankers, including Powell, have expressed disappointment at the lack of inflation progress in the first quarter. Earlier this month, policymakers kept their benchmark policy rate unchanged at a 23-year high, a level Powell said he was prepared to maintain “for as long as appropriate.”

The producer price index, a measure of wholesale prices, topped all economists’ forecasts in April, a government report showed Tuesday. That said, several components from the report that feed into the calculation of the Fed’s preferred inflation gauge — the personal consumption expenditures price index — were more mixed.  

Powell described Tuesday’s report as “mixed.” The consumer price index for April will be released Wednesday, and economists surveyed by Bloomberg estimate prices rose a firm 3.4% from a year earlier.

The US economy continues to show resilience even with the Fed settling in with higher-for-longer rates. Non-farm payrolls have averaged 246,000 a month so far this year, and unemployment remains low. The April jobs report, however, did show some signs of moderation, with a slower pace of job growth and an unexpected tick up in unemployment.

Powell described the labor market as “very strong” with signs of gradual cooling and re-balancing, in part driven by an increase in labor supply from a pickup in immigration. He added the labor market is about as tight as it was before the pandemic in 2019. 

This article was provided by Bloomberg News.