Federal Reserve Chairman Jerome Powell said risks to the U.S. central bank’s inflation forecast were “roughly balanced” even as he noted lingering concern over sluggish price rises.

“For a long time inflation was below target and we were pushing it,” Powell told the House Financial Services Committee Wednesday on his second day of semi-annual testimony before Congress. “We’ve now just about reached a symmetric 2 per cent objective. So it’s very close, and I think from this point forward the risks are roughly balanced.”

The Fed, he added, was still “slightly more worried about lower inflation.”

Inflation as measured by the Fed’s preferred gauge hit 2.3 per cent in the 12 months through May, and 2 per cent after excluding volatile food and energy components. That’s the first time core inflation reached the central bank’s 2 per cent goal since 2012.

The median forecast from Fed officials in June was for inflation of 2.1 per cent in 2018, 2019 and 2020.

Powell has laid out an upbeat assessment of the U.S. economy that will keep the central bank on a gradual path of raising interest rates for now. With unemployment near a 20-year low and inflation around the Fed’s 2 per cent target, policy makers have penciled in another two rate increases this year following quarter-point increases in March and June.

Once again, however, Powell highlighted the perils to the U.S. economy from escalating trade disputes initiated by President Donald Trump.

“If this process leads to a world of higher tariffs on a wide range of goods and services that are traded,” that would be “bad for our economy,” he said.

His comments come as an increasing number of economists and policy makers warn that trade tensions threaten to undermine global growth. The International Monetary Fund on Monday said world output could drop by about 0.5 per cent below its projected level by 2020 if threatened trade barriers become reality.

“This is the torch we’ve been carrying around the world for 75 years,” Powell said, referring to the benefits of free trade. “The bottom line is, a more protectionist economy is an economy that’s less competitive, it’s less productive.”

“You want to be careful to walk along this path because it may not be so easy to get off it,” he added.

Powell also said there’s no plan at the Fed, unless there is a meaningful economic downturn, to change its plan for reducing the size of the central bank’s balance sheet in response to the diminishing gap between short-term and long-term U.S. Treasury yields.

Some market participants and economists believe the shrinking of the balance sheet is contributing to that. Many also consider it a reliable harbinger of a coming recession when long-term yields fall below short-term yields.

--With assistance from Rich Miller, Jeanna Smialek, Craig Torres and Matthew Boesler.