By Ann Saphir and Lindsay Dunsmuir

(Reuters) - The Federal Reserve is not trying to engineer a recession to stop inflation but is fully committed to bringing prices under control even if doing so risks an economic downturn, U.S. central bank chief Jerome Powell said on Wednesday.

"We are not trying to provoke, and I don't think we will need to provoke, a recession," Powell said at a hearing before the U.S. Senate Banking Committee, although he acknowledged that a recession was "certainly a possibility" and events in the last few months around the world had made it more difficult to reduce inflation without causing one.

"It is essential that we bring inflation down if we are to have a sustained period of strong labor market conditions that benefit all," Powell said. The Fed in coming months will be looking for "compelling evidence" of slowing price pressures before it eases up on the interest rate increases it kicked off three months ago.

Inflation continues to run at least three times higher than the Fed's targeted level of 2%. A gauge of price increases that excludes volatile food and energy costs may have eased somewhat last month, Powell testified, but Russia's invasion of Ukraine and COVID-19 lockdowns in China are putting continued upward pressure on inflation.

One week ago, the Fed raised its benchmark overnight interest rate by three-quarters of a percentage point - its biggest hike since 1994 - to a range of 1.50% to 1.75%, and signaled rates would rise to 3.4% by the end of this year.

That steep rate hike path, designed to slow the economy, has sparked widespread concern about a recession and a weakening of labor markets, which Powell on Wednesday said were unsustainably hot.

On Wednesday, Powell reiterated that ongoing increases in the Fed's policy rate would be appropriate, with the exact pace dependent on the economic outlook. He declined to rule out a 100-basis-point move if it proved warranted.

"Inflation has obviously surprised to the upside over the past year, and further surprises could be in store," he said, repeating that policymakers would need to be nimble in response to the incoming data.

'COUGHING UP BONES'

Since the June 14-15 policy meeting, a number of Powell's fellow policymakers have lined up behind his comments last week that the central bank will very likely need to raise rates by either 50 or 75 basis points at its next meeting in July.

Earlier on Wednesday, Philadelphia Fed President Patrick Harker said incoming data would govern which of the two options to deliver. Chicago Fed President Charles Evans signaled later on Wednesday that he also is comfortable for now with continued rapid rate hikes, even as he nodded to the rising recession risk.