Federal Reserve Chair Jerome Powell said on Thursday the US central bank was "not far" from gaining the confidence it needs in falling inflation to begin cutting interest rates.

"I think we are in the right place," Powell said in a hearing before the Senate Banking Committee. "We are waiting to become more confident that inflation is moving sustainably to 2 percent. When we do get that confidence, and we’re not far from it, it will be appropriate to begin to dial back the level of restriction so that we don’t drive the economy into recession.”

Powell earlier in the hearing told US lawmakers the central bank was "well aware" of the risks its tough monetary policy posed to workers, but said rate cuts would still depend on the economy evolving as the Fed expects, with continued lower inflation.

Powell was pressed by the panel's chair, Ohio Democrat Sherrod Brown, on why the Fed was not quicker to cut rates "to prevent workers from losing their jobs."

"We're well aware of that risk, of course, and very conscious of avoiding it," Powell said.

"If what we expect and what we're seeing – continued strong growth, strong labour market...progress in bringing inflation down – if the economy evolves over that path, then we do think that the process of carefully removing restrictive...policy...can and will begin over the course of this year."

Powell's appearance in the Senate follows a hearing before the House Financial Services Committee on Wednesday. At both sessions he said that while lowering inflation was "not assured," the Fed's baseline outlook is for price pressures to continue to ease and economic growth to continue.

Investors currently expect an initial rate cut in June. (Reuters)