Fed Chair Jerome Powell has admitted that the fight against inflation is far from over, meaning interest rates will have to remain higher for longer.

Speaking at the Foreign Bankers’ Association meeting in Amsterdam, Powell said progress on inflation has slowed to a crawl this year after a promising 2023.

“We did not expect this to be a smooth road. But these [inflation data] were higher than I think anybody expected,” Powell said. “What that has told us is that we’ll need to be patient and let restrictive policy do its work.”

Powell then admitted, “I do think it’s really a question of keeping policy at the current rate for longer than had been thought.”

Powell doesn’t know whether inflation would be “more persistent” going forward, admitting that he needs “more than a quarter’s worth of data to really make a judgment on that.”

While the Fed chair previously shrugged off fears over inflation, his latest comments confirm that the central bank still has a lot more work to do before rate cuts are on the table.

According to CME Group’s FedWatch Tool—a key gauge of the market's interest rate expectations—the central bank will sit on its hands until at least September.

In the meantime, there’s plenty of evidence that the inflation genie isn’t back in the bottle yet.

More bad news on the inflation front

The Fed’s wait-and-see approach has good reason.

For one, the most recent release of producer prices—which came out at the highest level in the past year—shows that costs aren't subsiding at the production stage.

The Producer Price Index (PPI), which measures the prices paid by manufacturers and wholesalers, rose 2.2% in the 12 months through April—a sharp increase from March’s 1.8% reading.

Perhaps more importantly, the rising PPI may foreshadow higher headline inflation in the coming months, as producers tend to pass rising costs on to consumers.

“The concern here is that we now have a trend, an upward trend in producer prices, which can only be passed through to consumers and result in upward pressure on consumer price inflation over the coming months,” Kurt Rankin, senior economist for the PNC Financial Services Group, told CNN.

According to Rankin, the latest PPI data suggests that stubborn inflation will persist through June, July, and August due to “supply side pressure.”

Services are another major category fueling inflation. On the producer side, service costs accounted for nearly three-fourths of the PPI’s overall increase in April.

On the consumer side, services continue to outpace overall headline inflation, rising 0.5% for the month and 5.3% for the year, according to the latest inflation report.