US no longer an overheated economy, says Fed Chair Jerome Powell

US Federal Reserve chief Jerome Powell believes that the US is no longer an overheated economy with a job market that has cooled from its pandemic-era extremes and in many ways is back where it was before the health crisis.

"We are well aware that we now face two-sided risks, and can no longer focus solely on inflation. The labour market appears to be fully back in balance," Fed Chair Jerome Powell said in remarks to Congress.

Powell explained to lawmakers that he did not want "to be sending any signals about the timing of any future actions" on interest rates, which is consistent with the Fed's recent efforts to focus attention on the evolution of economic data - and the possible choices the Fed might make in response.

Nonetheless, with a presidential election on November 5 and only two Fed meetings before it, Powell faced questions by Democrats regarding the risks to the job market of not cutting rates soon, and by Republicans concerning the pain that households face as inflation remains above the central bank's 2% target.

The Fed's overnight borrowing rate is currently between 5.25% and 5.50%, the highest level in about 23 years and the result of 11 consecutive hikes after inflation reached its highest level since the early 1980s.

Powell stated in his remarks to Senators that inflation has been improving in recent months and that "more good data would strengthen" the case for tighter monetary policy.

Powell's comments appeared to indicate a growing belief that inflation will get back to the Fed's target, contrasting the lack of progress on inflation in the initial months of the year with recent improvement that has helped create confidence that price pressures are going to ease.

"After a lack of progress toward our 2% inflation objective in the early part of this year, the most recent monthly readings have shown modest further progress. More good data would strengthen our confidence that inflation is moving sustainably toward 2%," Powell said in remarks to the Senate Banking Committee. "

On Thursday, the Fed will get consumer price index figures for the month of June. The retail inflation remained flat in May, and economists expect it to rise marginally later this week.