NEW YORK The Federal Reserve's fight to lower inflation back to its 2% target "has a long way to go," Federal Reserve Chair Jerome Powell said on Wednesday in testimony prepared for delivery to the House Financial Services Committee.

Investors broadly expect increases to resume at the Fed's July meeting, after the Fed last week paused a 15-month hiking cycle.

The hearing is the first of two Capitol Hill appearances this week as part of his twice-yearly reports to federal lawmakers, is set to begin at 10 a.m. (1400 GMT).

After five percentage points of rate hikes the Fed has approved since March of 2022, the decision not to raise rates last week was taken as a "prudent" step that would "allow the Committee to assess additional information and its implications for monetary policy," Powell said.

MARKET REACTION:

STOCKS: S&P 500 e-mini futures held losses and were off 0.26%

BONDS: U.S. Treasury 10-year note yields ticked lower after the remarks, and were at 3.758%,

FOREX: The euro turned 0.05% firmer and the dollar index paired a small gain

COMMENTS:

PETER CARDILLO, CHIEF MARKET ECONOMIST, SPARTAN CAPITAL SECURITIES, NEW YORK

"Stocks are going to stabilize because Powell is not going to divert from what he said at the press conference last week. The Fed is going to be hawkish until inflation reaches 2%. The market knows this is not attainable within two years. We probably won’t see 2% inflation for four years unless the Fed gets overly aggressive and pulls a Volcker, and that’s not in the cards.

"The Fed is playing tough talk, they want to reassure the markets that they’re serious about bringing down inflation.

"If the June and July inflation numbers come in lower, there’s a chance the Fed will skip in July as well.

"We’ve had some strong (economic) indicators. But the numbers are uneven. Going into the summer months, if the high cost of money, of financing, begins to limit consumer spending, then we’ll be in recession.

"I think the Fed is keeping this tough talk going because they don’t want the markets to get over enthusiastic."

HUGH JOHNSON, CHIEF ECONOMIST, HUGH JOHNSON ECONOMICS, ALBANY, NEW YORK

"If there's a right word to describe Federal Reserve policy currently, it might just be confusion."

"It's very difficult for him (Powell) to be very definitive because what the Federal Reserve does will depend on the data we see between now and the July meeting and between the July meeting and the September meeting."

ROBERT PAVLIK, SENIOR PORTFOLIO MANAGER, DAKOTA WEALTH FAIRFIELD, CONNECTICUT"The market is on edge as to what Powell's going say in his testimony. Many have said that it's (policy tightening) too much in too short a period of time and what you're seeing is parts of the market trying to test the recent gains and see if they'll hold."

"I see higher interest rates for a fairly longer period of time perhaps going more than just July. Anybody banking on an interest rate cut in 2023 will be rethinking and pricing that into their models. I don't think that a rate cut is coming in 2023 and anybody that's thinking that is misdirected."

(Compiled by the Global Finance & Markets Breaking News team)