The economy needs to take one of these 2 paths before the Fed cuts interest rates, Powell says

• The Federal Reserve held interest rates steady once again on Wednesday.
• Powell said inflation data is not yet where it needs to be to consider cutting rates.
• He said it'll take better inflation data or "unexpected" labor market weakness before that happens.

Federal Reserve Chair Jerome Powell will not say when the nation's central bank will cut interest rates, but he did say what it will take for that to happen.

On Wednesday, the Federal Open Market Committee announced that interest rates will remain unchanged, continuing the pause that began in September following 11 consecutive rate hikes. However, the announcement confirmed that rate cuts won't be happening any time soon, with the FOMC's statement saying that "there has been a lack of further progress toward the Committee's 2 percent inflation objective."

The Consumer Price Index, which measures inflation, rose 3.5% year-over-year in March, a slight increase from the 3.2% year-over-year reading in February. Given that inflation is not coming down at the rate the Fed is hoping for, Powell said during his Wednesday press conference that the central bank needs to wait for more economic data before cutting rates enters the discussion.

'We've said that we don't think it would be appropriate to dial back our restrictive policy stance until we gain greater confidence that inflation is moving down sustainably toward 2%," Powell said.

"If we did have a path where inflation proves more persistent than expected, and where the labor market remains strong but inflation is moving sideways, and we're not gaining greater confidence, that would be a case in which it could be appropriate to hold off on rate cuts," he continued.

But he said the economy could take one of two paths that would give the Fed enough confidence to cut rates: further data to prove that inflation is moving toward the Fed's 2% target and an "unexpected weakening in the labor market."

The labor market has continued to be strong, dampening any urgency the Fed might have to cut rates. The US added 303,000 US jobs in March, with Julia Pollak, the chief economist at ZipRecruiter, previously calling that data "the Fed's holy grail: strong job market with non-inflationary growth."

However, with inflation still above target, rate cuts are not yet in the picture. Powell did note, however, that it's "unlikely" there will be any interest-rate hikes, strongly indicating that rates will remain steady until the Fed gets the data it needs to begin considering relief for prospective borrowers.

The Fed's decision to hold rates steady prompted some pushback from Democratic lawmakers who are worried that continued high rates will hurt Americans. Rep. Brendan Boyle, the top Democrat on the House Budget Committee, said in a statement that "the longer the Fed maintains these elevated interest rates, the greater the risk of harming that economic progress."

"The Fed must remember its dual mandate and avoid keeping these rates too high for too long," Boyle said.

Powell said he's "acutely aware that high inflation imposes significant hardship as it erodes purchasing power, especially for those least able to meet the higher costs of essentials like food, housing, and transportation."

And he won't risk easing up on the Fed's restrictive policy too early.

"We believe it is restrictive, and we believe over time it will be sufficiently restrictive," Powell said. "That will be a question that the data will have to answer."