(Reuters) -Ongoing economic growth, a solid job market, and inflation that remains above the 2% target means the U.S. central bank does not need to rush to lower interest rates and can deliberate carefully, Federal Reserve Chair Jerome Powell said on Thursday.

In remarks that align with a developing expectation in financial markets for fewer rate cuts next year than previously forecast by Fed officials, Powell affirmed that he and his fellow policymakers still consider inflation to be "on a sustainable path to 2%" that will allow the U.S. central bank to move monetary policy "over time to a more neutral setting."

MARKET REACTION:

STOCKS: The S&P 500 extended losses to drop 0.6%

BONDS: US Treasury 10-year yield pared losses after Powell's remarks, last down 1.4 basis points at 4.437%

FOREX: The dollar index edged higher to rise 0.4%

COMMENTS:

ADAM HETTS, GLOBAL HEAD OF MULTI-ASSET, JANUS HENDERSON INVESTORS, DENVER, CO

"The comments from Powell put more cold water on what used to be a very optimistic outlook on the path for rate cuts. However, we can't take for granted that inflation and labor are in balance so this is an encouraging message on the economy."

"The market continues to reprice the terminal rate and this puts a damper on the post election rally. It still has room to run but for now its head first into a higher terminal rate and long term Treasuries."

PAUL NOLTE, SENIOR WEALTH ADVISOR, MARKET STRATEGIST, MURPHY & SYLVEST, ELMHURST, ILLINOIS "He's a little less dovish than maybe Wall Street was expecting, and it's part of the reason why we're seeing a back-off now in the S&P 500... But it's hard to be super dovish with the reports we've gotten in the last two days - consumer prices, producer prices and the weekly jobless claims. All of that points to still-decent job growth and sticky inflation, above the 2% target."

QUINCY KROSBY, CHIEF GLOBAL STRATEGIST, LPL FINANCIAL, CHARLOTTE, NC

"Fed Chair Powell telegraphed news that markets didn't want to hear but news that was clearly manifest in the last CPI report, that the Fed cannot yet declare victory in its campaign to quell inflation."

"The various interpretations from the CPI report suggested that there's a cohort believing the Fed could cut rates in December versus those who warned that higher year-over-year inflation was indicative of inflation's downward trajectory losing momentum."

"Although it's to be expected that the last mile towards price stability can be bumpy, Powell reminded markets that once again the Fed will not deliver the series of rate cuts they want, unless of course the labor market deteriorates -- a scenario the market certainly doesn't want."

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