WASHINGTON (AP) — Chairman Jerome Powell said Thursday that the Federal Reserve will likely cut its key interest rate slowly and deliberately in the coming months, in part because inflation has shown signs of rising. signs of persistence and Fed officials want to see where it goes next.

Powell, in remarks prepared for a speech in Dallas, said inflation is getting closer to the Fed’s 2% target, “but it’s not there yet.”

At the same time, he says, the economy is strongand Fed policymakers can take the time to monitor inflation developments.

“The economy is not sending any signals that we need to hurry to lower rates,” the Fed chairman said. “The strength we are currently seeing in the economy gives us the opportunity to approach our decisions with caution. »

Economists expect the Fed to announce another quarter-point rate cut in December, after a reduction of a quarter point last week and a half-point reduction in September.

But what action the Fed will take next is much less clear. In September, central bank officials collectively indicated they planned to cut their benchmark rate four times in 2025. Wall Street traders now expect only two rate cuts from the Fed, according to futures prices followed by CME FedWatch.

The Fed’s benchmark interest rate tends to influence borrowing rates across the economy, including for mortgages, auto loans and credit cards. But other factors can also push long-term rates higher, including expectations for inflation and economic growth.

Donald Trump’s victory in the presidential election sent Treasury yields higher. It’s a sign that investors expect faster growth next year, as well as potentially larger budget deficits and even higher inflation if Trump imposes widespread tariffs and mass deportations of migrants as he promised.

In his remarks on Thursday, Powell suggested that inflation could remain slightly above the Fed’s target in the coming months. But he reiterated that inflation should ultimately fall further, “albeit on a path sometimes strewn with pitfalls.”

Other Fed officials have also recently expressed uncertainty about the extent of the rate cut, given the economy’s steady growth and apparent stickiness in inflation.

As measured by the central bank’s preferred inflation gauge, so-called core prices, which exclude the volatile costs of food and energy, have been stuck in the high 2% range for five months.

On Wednesday, Lorie Logan, president of the Fed’s Dallas branch, said it was unclear how much further the Fed should cut its key short-term rate.

“If we cut too sharply … inflation could reaccelerate and the (Fed) might have to change direction,” Logan said. “I think it’s best to proceed with caution.”