Federal Reserve Chair Jerome Powell said Wednesday that recent high inflation readings don’t “change the overall picture,” suggesting the central bank is still on track to lower its key interest three times this year if price increases continue to ease as expected.

“The recent data do not, however, materially change the overall picture, which continues to be one of solid growth, a strong but rebalancing labor market, and inflation moving down toward 2% on a sometimes bubbly path,” Powell said in a speech at a forum at the Stanford Graduate School of Business.

A report Tuesday generally supported the Fed’s plan to chop interest rates, revealing that job openings were roughly unchanged at 8.8 million in February – below the record 12.2 million in early 2022 but above the pre-pandemic average of about 7 million.

The share of people quitting jobs remained below pre-COVID levels after reaching record levels during the Great Resignation. Back then, employers faced dire worker shortages, forcing them to hike wages that helped push inflation higher.

Is inflation on the rise again?

The Fed’s preferred inflation measure has fallen from a four-decade high of 7% in mid-2022. But last week, a report showed that consumer prices in February increased 2.5% from a year earlier, up from a 2.4% rise in January, according to the personal consumption expenditures index. That’s still above the Fed’s 2% goal.

And a “core” measure that excludes volatile food and energy items and that the Fed follows more closely edged down to 2.8% from 2.9% the previous month.

On a monthly basis, prices increased relatively sharply in both January and February, raising concerns that a steady decline of inflation toward 2% might be stalling. Another inflation gauge, the consumer price index, showed a similar acceleration in price gains.

But on Wednesday, Powell said, “On inflation, it is too soon to say whether the recent readings represent more than a bump.”

Federal Reserve March meeting: Rates hold steady; 3 cuts seen in '24 despite inflation

When can we expect the Fed to lower interest rates?

He reiterated that officials will be cautious as they consider lowering rates. “We do not expect that it will be appropriate to lower our policy rate until we have greater confidence that inflation is moving sustainably down toward 2%,” Powell said. “Given the strength of the economy and progress on inflation so far, we have time to let the incoming data guide our decisions on policy.”

Powell added that the Fed’s benchmark short-term rate has likely reached its peak, and it will probably “be appropriate to begin lowering the policy rate at some point this year.”

The fed funds futures market expects the central bank to begin trimming the rate in June and to decrease it three times this year.

Last month, the Federal Reserve left its key interest rate unchanged at a 23-year high of 5.25% to 5.5% and held to its forecast of three rate cuts in 2024. Starting in March 2022, the Fed hiked the rate from near zero to fight high inflation but has left it unchanged since last July.

What happens when the Fed raises or lowers interest rates?

The Fed raises rates to make consumer and business borrowing more expensive in an effort to curb economic activity and inflation. It lowers rates to stimulate weak growth or dig the economy out of recession. Officials are struggling to balance both of its mandates.

"Reducing rates too soon or too much could result in a reversal of the progress we have seen on inflation and ultimately require even tighter policy to get inflation back to 2%,” Powell said. “But easing policy too late or too little could unduly weaken economic activity and employment.”

Is the Fed influenced by politics?

Powell also touched on the politics swirling around the Fed during a presidential election year. Former President Donald Trump has suggested that Powell wants to "help the Democrats" by cutting interest rates. Meanwhile, Democratic lawmakers have urged Powell to reduce rates.

Powell stressed the Fed's independence from both sides of the political aisle.

"Fed policymakers serve long terms that are not synchronized with election cycles," he said in his prepared remarks. "In the case of the Fed, independence is essential to our ability to serve the public."

In a question-and-answer session after the speech, he added, "We're going to do what we're going to do and we're going to do it for economic reasons. It doesn't matter what the election calendar is saying."

This article originally appeared on USA TODAY: Powell signals Fed is still on track to cut rates three times in 2024