Fed's Powell says high interest rates need more time to work

WASHINGTON (Reuters) -- Federal Reserve Chair Jerome Powell said on Tuesday the U.S. central bank may need to keep interest rates higher for longer than previously thought, given what he called a "lack of further progress" this year towards the 2% inflation target.

"The recent data have clearly not given us greater confidence and instead indicate that it's likely to take longer than expected to achieve that confidence," Powell told a forum in Washington, in what is likely to be his last public appearance before the April 30-May 1 policy meeting.

"Right now, given the strength of the labor market and progress on inflation so far, it's appropriate to allow restrictive policy further time to work and let the data and the evolving outlook guide us," he said.

U.S. central bankers are universally expected to leave rates unchanged at their upcoming meeting, but investors are keen for any hints on when officials feel a reduction in borrowing costs could come, and Powell's remarks suggest it won't be soon.

"If higher inflation does persist, we can maintain the current level of restriction for as long as needed," Powell said. "At the same time, we have significant space to ease should the labor market unexpectedly weaken."

Fed Vice Chair Philip Jefferson omitted any mention of rate cuts in his remarks earlier on Tuesday to a research conference, and said the U.S. central bank was ready to keep its tight monetary policy in place if inflation fails to slow as expected.

Jefferson noted the central bank was facing a strong economy and had seen little recent progress in bringing down inflation, excluding what had been a staple reference in Fed speeches to gaining "confidence" in lower inflation and then cutting rates.

Fed staff estimates that