Federal Reserve Chairman Jerome Powell said Thursday that there are no "decisive" signs of wage inflation yet.
Speaking in testimony before the Senate Banking Committee, the central bank head also said more gains can come in the labor market without causing harmful levels of inflation.
The remarks are significant in that during Powell's remarks two days ago before the House Financial Services Committee were interpreted as being more concerned about inflation, leading the Fed to a more aggressive path in interest rate hikes.
"We don't see any strong evidence yet of a decisive move up in wages. We see wages by a couple of measures trending up a little bit, but most of them continuing to grow at two and a half percent," he said. "Nothing is suggesting to me that wage inflation is at a point of accelerating. I would expect that some continued strengthening in the labor market can take place without causing inflation."
Powell added that he expects to see wage inflation soon.
However, his predecessor, Janet Yellen, often said the same thing, and the Fed has been flummoxed by low inflation and particularly little wage pressures. The January nonfarm payrolls report showed average hourly earnings accelerating by 2.9 percent, but the central bank rarely moves its position based on a single month's data.
Powell said the Fed expects to continue to hiking rates gradually as it looks to keep economic growth in check while not thwarting the recovery.
"By continuing to gradually raise interest rates over time, we're trying to balance those two things and achieve inflation moving to target but also make sure the economy doesn't overheat," he said. "There's no evidence that the economy is currently overheating. But that's really the path that we've been on. My expectation is that that will continue to be the appropriate path as long as the economy continues to perform this way."
Powell faces questioning about why the Fed is going ahead with rate hikes with inflation continuing to undershoot the central bank's target.
"At this point, we have 4.1 percent unemployment. The things we don't want to have happen is to get behind the curve, have inflation move up and have to raise rates too quickly and cause a recession," Powell said.