"In the second quarter, actually, we did make some more progress" on taming inflation, Powell said at an event at the Economic Club of Washington. "We've had three better readings, and if you average them, that's a pretty good place."

Consumer prices in the second quarter rose at an annualized pace of 2.1%, excluding the volatile food and energy components, and that index tends to run higher than the Fed's preferred Personal Consumption Expenditures price index. PCE data for June will not be released until next week.

"What we've said is that we didn't think it would be appropriate to begin to loosen policy until we had greater confidence" that inflation was returning sustainably to 2%, Powell continued. "We've been waiting on that. And I would say that 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."

Last week, the Labor Department reported that the CPI fell in June from the month before, the first month-to-month decline in four years. Coupled with a reading of wholesale inflation a day later, economists now estimate the PCE gauge the Fed uses for its inflation target will show yearly price increases have eased closer toward 2%.

GETTING BACK IN BALANCE

Powell's description of the economy suggested he views it in important ways as back into the sort of balance that would allow a steady return of inflation to the central bank's target, and give the Fed more berth to try to protect the full employment side of its two congressionally set goals.

"There is no slack in the labor market...Essentially we're at equilibrium now," he said. The unemployment rate, at 4.1%, is just a tenth of a percentage point below Fed officials' median view of what represents full employment consistent with 2% inflation.

"Look where inflation is. Inflation is at 2.5%," Powell said, calling the fall of inflation from its peak without a fast rise in unemployment "in defiance of a lot of conventional wisdom."

Inflation as measured by the PCE price index as of May was 2.6%, but following the release of recent consumer and wholesale price data economists estimate that the next release will see it decline to 2.5% or less on an annual basis.

Powell also said at the event that he intended to serve out his full term as chair, which ends in early 2026, but declined to comment on whether he would remain as chair if tapped by the next president.

His remarks are likely his last until his press conference following the Fed's July 30-31 meeting.

Fed governors Christopher Waller and Adriana Kugler as well as other Fed officials also speak this week, comments that may further frame the central bank's thinking at a key moment in their deliberations.

Inflation is edging closer to the central bank's target, and policymakers are increasingly concerned about slowing the economy too much and causing the unemployment rate to rise.

The betting among investors has tilted strongly towards the Fed starting rate cuts in September. Changes to the policy statement in July could provide a strong signal of that by updating how inflation is described and assessing how recent data has added to policymakers' confidence that the pandemic-era outbreak of inflation has subsided.

After rapidly lifting interest rates starting in 2022 to combat the worst inflation outbreak since the 1980s, the Fed has left its benchmark policy rate unchanged since last July in a range of 5.25%-to-5.50%.

As Powell spoke financial markets all but abandoned what had been rising bets on a July rate cut. Traders continue to expect a September rate cut followed by additional cuts in November and December, bringing the policy rate down to 4.5%-4.75% by year-end.