Federal Reserve Chair Jerome Powell said Wednesday the central bank will keep raising interest rates to fight inflation but at a slower pace, signaling a slow-down in rate hikes that have raised costs on new mortgages and car payments to slow the economy.

In a Wednesday speech, Powell said that despite a recent slowdown in price growth, officials are looking for “substantially more evidence to get comfort that inflation is actually declining.” 

“Despite some promising developments, we have a long way to go in restoring price stability,” Powell said in a speech hosted by The Brookings Institution.

Powell said the Fed would keep raising interest rates and maintain them at levels meant to restrict the economy until inflation was on track to hit the Fed’s 2 percent annual target. 

But Powell added that the Fed will likely slow the pace of rate hikes as soon as December after previous increases pushed the U.S. economy to the edge of a recession. 

“We have a risk management balance to strike. We think slowing down at this point is a good way to balance the risks,” Powell said.

The Fed began a historically aggressive battle against inflation earlier this year after keeping rates near zero since the onset of the COVID-19 pandemic in 2020. Over six consecutive meetings since March, the Fed boosted its baseline interest rate range to 3.75 to 4 percent, including four straight hikes of 0.75 percentage points in its most recent four meetings.

Some federal measures of inflation have shown signs of stabilizing in recent months as the combined toll of high prices and swift rate hikes slow the economy. 

Powell said Wednesday the Fed expects its preferred measure of inflation, the personal consumption expenditures (PCE) price index minus food and energy, to have risen 6 percent over the past 12 months. That would be a 0.2 percentage point drop from September’s 6.2 percent annual increase in core prices. 

Economists expect inflation to keep falling further as the economy continues to slow and runs into headwinds caused by a recession in Europe. But 6 percent annual inflation, Powell added, is still “much too high” and would require the Fed to keep slowing the economy through rate hikes.

“Forecasts have been predicting just such a decline for more than a year, while inflation has moved stubbornly sideways. The truth is that the path ahead for inflation remains highly uncertain,” Powell said.

Some economists and a growing number of Democratic lawmakers have urged the Fed to stop raising interest rates over fears the bank could drive the U.S. into a recession. While many economic forecasters believe the U.S. will experience a mild slowdown in early 2023, others believe the Fed could still avoid a full-blown recession by easing off the brakes of the economy.

Critics of the Fed’s aggressive rate hikes also say the higher rates will do little to solve key sources of higher prices, such as the food and energy shocks created by the war in Ukraine, while putting millions of vulnerable Americans out of work.

Powell acknowledged that the U.S. economy has not yet felt the full impact of the Fed’s previous rate hikes—let alone the ones that lie ahead—and could face a steep slowdown. He said the notorious lags in monetary policy means it “makes sense” for the Fed to slow its rate hikes and assess how much further it needs to go.

Even so, Powell made clear the risks of a recession will not keep the bank from raising rates high enough and keeping them elevated long enough to bring inflation back down to the Fed’s 2 percent annual target.

“It is likely that restoring price stability will require holding policy at a restrictive level for some time. History cautions strongly against prematurely loosening policy. We will stay the course until the job is done,” Powell said.