Fed's Powell says restrictive monetary policy needs more time to work

WASHINGTON (Reuters) -- Top U.S. central bank officials including Federal Reserve Chair Jerome Powell backed away on Tuesday from providing any guidance on when interest rates may be cut, saying instead that monetary policy needs to be restrictive for longer and further dashing investors' hopes for meaningful reductions in borrowing costs this year.

Fed policymakers have said since the start of the year that rate cuts are contingent on gaining "greater confidence" that inflation is moving toward the central bank's 2% goal, but readings over the past few months show price pressures may even be moving in the opposite direction.

"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 until early this month analysts and investors thought rate cuts would likely start with an initial quarter percentage point reduction at the Fed's June 11-12 meeting, with two more cuts happening by the end of 2024.

Now the first cut is expected in September, and the odds of a second cut are dwindling.

"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