Fed chair says inflation eased 'substantially' but remains too high

US Federal Reserve Chairman Jerome Powell said Wednesday that inflation in the world's biggest economy has eased "substantially" but still remains too high.

Although inflation is moving closer to the Fed's long-term target of 2%, there have been hotter inflation readings in recent months, Powell said in a press conference after the conclusion of the Fed's two-day monetary policy meeting.

"The other thing is, in the second half of the year, you had some pretty low readings, so it might be harder to make that 12-month window forward," he said. "Nonetheless, we're looking for data that confirm the low readings that we had last year, and this gives us a higher degree of confidence that what we saw was really inflation moving sustainably down to 2%."

The Fed on Wednesday kept interest rates steady, leaving the federal funds rate unchanged between the 5.25%-5.5% target range -- the highest in 23 years.

The central bank, meanwhile, expects at least three interest rate cuts in 2024, according to its latest projection materials.

The probability of a rate cut of 25 basis points at the Fed's June 12 meeting rose to 70.8% later Wednesday, according to the FedWatch Tool provided by the US-based Chicago Mercantile Exchange Group.

Despite the Fed's best efforts, consumer inflation in the US was up 3.2% annually in February, with a monthly 0.4% gain, both above market expectations.

Producer inflation in February rose 1.6% annually and 0.6% on a monthly basis, also above market estimates.

The Fed's preferred inflation indicator, the core personal consumption expenditures (PCE) price index, rose 2.8% annually and 0.4% monthly in January.