WASHINGTON (Reuters) – Inflation “remains above” the U.S. Federal Reserve’s 2 percent target but has improved in recent months and “further good data would strengthen” the case for the central bank to cut interest rates, Fed Chairman Jerome Powell said on Tuesday during a hearing before the U.S. Senate Banking Committee.

Jerome Powell’s comments appear to show growing confidence that inflation will return to target, a condition for easing monetary policy.

The Fed chairman contrasted the lack of progress on inflation in the first months of the year with the recent improvement that has helped boost the central bank’s confidence that price pressures will continue to ease.

The official also noted that the Fed is now also concerned about risks to the jobs market and the economy if rates stay too high for too long.

“After a lack of progress toward our 2 percent inflation target at the start of the year, the most recent monthly data have shown further modest progress,” Powell said.

“Further good data would strengthen our confidence that inflation is sustainably approaching 2%.”

Consumer price figures for June will be released on Thursday.

A jobs report released Friday showed 206,000 jobs were created in June, but the monthly trend slowed and the unemployment rate rose to 4.1 percent.

The Fed chairman called the figure “still a low level,” while noting that “given the progress made in both reducing inflation and cooling the labor market over the past two years, elevated inflation is not the only risk the central bank faces.”

Too much restrictive policy for too long “could unduly weaken economic activity and employment,” he said, citing the risks of undermining a period of economic growth that he said “remains solid” with “robust” private demand, an improvement in general supply conditions and a “recovery in residential investment.”

(Reporting by Howard Schneider; by Diana Mandiá, edited by Blandine Hénault)

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