The Federal Reserve faces a cooling job market as well as persistently high prices, Chair Jerome Powell said in testimony Tuesday to Congress, a shift in emphasis away from the Fed’s single-minded fight against inflation of the past two years that suggests it is moving closer to cutting interest rates.

The Fed has made “considerable progress” toward its goal of defeating the worst inflation spike in four decades, Powell told the Senate Banking Committee.

“Inflation has eased notably” in the past two years, he added, though it still remains above the central bank’s 2% target.

Powell pointedly noted that “elevated inflation is not the only risk we face.” Cutting interest rates “too late or too little could unduly weaken economic activity and employment,” he said.

The Fed chair addressed the Senate panel on the first of two days of semi-annual testimony to Congress. On Wednesday, he will testify to the House Financial Services Committee.

From March 2022 to July 2023, the Fed raised its benchmark interest rate 11 times to a two-decade high of 5.3% to fight inflation, which peaked at 9.1% two years ago. Those hikes increased the cost of consumer borrowing by raising rates for mortgages, auto loans and credit cards, among other forms of borrowing. The goal was to slow borrowing and spending and cool the economy.

On Tuesday, Powell noted that inflation reports covering the first three months of this year did not boost Fed officials’ confidence that inflation was coming under control.

“The most recent inflation readings, though, have shown some modest further progress,” Powell told the Senate committee, “and more good data would strengthen our confidence that inflation is moving sustainably toward 2%.”