Powell on unemployment and inflation

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Investors fully expect a quarter-point cut at the Fed's July 30-31 gathering, according to pricing in interest-rate futures, though odds were dialed back a bit after a stronger-than-expected US inflation report earlier on Thursday.

The core US consumer price index excluding food and energy components rose 0.3% in June, the largest increase since January 2018, data on Thursday showed. That as the largest increase since January 2018 and followed four straight monthly gains of 0.1%.

The so-called core CPI was boosted by strong gains in prices for apparel, used cars and trucks, as well as household furnishings.

Gasoline and fuel oil, electricity and piped natural gas all fell, but the costs for shelter - rent and the equivalent expense for homeowners - surged compared to May and have been rising steadily amid a tight housing market.

ASB senior economist Mark Smith also picked annual inflation to "tick up" to 1.7%, and core inflation measures were expected to be clustered around, or slightly below, 2% year on year. Australia's S&P ASX 200 gained 0.3% to 6,717.70.

Mr Smith was picking 50 basis points to be cut from the OCR during the rest of the year, with it closing the year at 1%.

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The Fed is monitoring inflation through the personal consumption expenditures (PCE) index to determine monetary policy. Core prices had been expected to edge up by 0.2 percent.

In his first day of testimony before Congress on Wednesday, Powell confirmed the USA economy was still under threat from disappointing factory activity, tame inflation and a simmering trade war, and said the Fed stood ready to "act as appropriate".

The Fed chair said overall growth has also "moderated", and cited the possibility that "weak inflation will be even more persistent than we now anticipate". But Powell's cautious stance helped fuel bets on heftier easing at its next policy meeting on July 30-31.

Following the hearing on Wednesday, the Fed is to release the minutes from its last policy meeting, which should show the extent to which the thinking at the central bank shifted in the days following Trump's Mexico tariff threat, and how the discussion was shaped by other concerns including weak inflation. The monthly jobs report out last week showed that USA hiring rebounded last month.

In June, owners' equivalent rent of primary residence, which is what a homeowner would pay to rent or receive from renting a home, rose 0.3%, matching May's gain. In Japan, the Nikkei 225 index climbed 0.5% to 21,643.53 and South Korea's Kospi advanced 1.1% to 2,080.58.

While sentiment has recovered some in recent weeks, businesses around the country have been telling the Fed about their concerns about material prices and access to supplies, Powell told a Senate committee. Prices for apparel tumbled in March and April after the government introduced a new method and data to calculate their cost. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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