Federal Reserve Chair Jerome Powell's testimony before House lawmakers is underway Wednesday morning. Over two days of hearings, Powell will update Congress on the state of the US and the Fed's progress in combating persistent inflation, appearing before the House Financial Services Committee today and the Senate Banking Committee on Thursday.

In Powell's statements made ahead of Wednesday's hearing, the Fed Chair believes it will "likely be appropriate to begin dialing back policy restraint" on interest rates sometime in 2024 if the economy continues to steadily improve.

Yahoo Finance Fed Reporter Jennifer Schonberger analyzes Powell's latest comments on Capitol Hill, underlining the Fed's data-centric approach to future rate cuts.

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

Editor's note: The headline and article were updated to reflect the latest comments from Chair Powell.

This article was written and updated by Luke Carberry Mogan.

Video Transcript

SEANA SMITH: Let's talk about what's happening down in DC today, because Fed Chair Jay Powell testifying before lawmakers today, as investors look for any clues on the timing of that first rate cut. Now his comments comes as the latest reading on private payrolls out this morning, showing that the labor market remains resilient.

Yahoo Finance reporter Jen Schonberger is live from Capitol Hill with the latest on what to expect from Powell. Jen.

JENNIFER SCHONBERGER: A good morning, Seana. Federal Reserve Jay Powell set to testify before the House in the first of his two-day semiannual testimony to Congress, where he will tell lawmakers that if the economy turns out as thought, it will likely be appropriate to begin lowering rates at some point this year. Though Powell will caution that in order to begin lowering rates, officials need to gain more confidence that inflation is moving sustainably back towards the Fed's 2% target.

Powell will say in prepared remarks, quote, "If the economy evolves broadly as expected, it will likely be appropriate to begin dialing back policy restraint at some point this year." He says lowering rates too soon can undo the progress seen so far in lowering inflation. At the same time, holding rates too high for too long could weaken the economy.

Powell says it's likely that the Fed has reached the peak on the policy rate in this cycle, pointing to the job market, which is coming back into better balance. Though he says that demand for workers still exceeds the supply of available workers.