FED WATCH: Investors are still digesting the views of Fed Chair Powell, who on Tuesday indicated interest rates could rise faster than expected. But in remarks at an event in Sao Paulo, Brazil, New York Fed President William Dudley said "gradual" could still apply to a scenario in which borrowing costs were raised four times this year, instead of the three moves Fed policymakers projected when they issued their last set of economic projections in December.
Powell said that when it came to projecting future rate increases at the Fed's upcoming March meeting, at which a quarter percentage point rise is nearly certain to be announced, he and other members of the Open Market Committee would be "taking into account everything that's happened since December".
Powell added that he expects to see wage inflation soon.
Gold prices steadied on Wednesday after the previous session's more than 1 per cent fall following comments by the Federal Reserve's new chairman that fueled views the USA central bank would raise rates four times this year rather than three.
Heavy equipment maker Caterpillar fell 2 percent and aerospace giant Boeing gave back 4 percent. "That's a problem given that, in the last four downturns, the Fed has cut rates by an average of 5.5 percentage points to stimulate renewed growth".
It set up the Australian sharemarket for sharp falls at the open, while the Australian dollar also fell on the news, dropping around 0.7 per cent to be trading at around 77.25 U.S. cents. He is scheduled to testify on the same topic before the Senate Banking Committee on Thursday.
Prices for the benchmark 10-year Treasury note eked higher, lowering yields to 2.86% from Wednesday's 2.87%.
Powell faces questioning about why the Fed is going ahead with rate hikes with inflation continuing to undershoot the central bank's target.
Pressed by some Democratic lawmakers about the impact of inequality on the economy, the gap in unemployment rates between whites and blacks, and on the economic implications of stricter immigration, Powell largely recited the Fed's commitment to its goal of maximizing employment with stable prices.
The dollar and the yen traded 0.06 percent higher at 106.74. We've seen some data that will, in my case, add some confidence to my view that inflation is moving up to target. In his testimony, Powell described trade as a "net positive" while conceding it created some losers in the economy, and said "the tariff approach is not the best approach".
Fed chief Powell will deliver the second leg of his semi-annual testimony on Thursday, an opportunity to clarify comments made on Tuesday that rekindled speculation over United States monetary tightening this year happening faster than expected. "I would not want to presume policies away from our mandate", Powell said.
Rather, "the robust job market should continue to support growth in household incomes and consumer spending, solid economic growth among our trading partners should lead to further gains in US exports, and upbeat business sentiment and strong sales growth will likely continue to boost business investment", he said. Powell will appear before the Senate Finance Committee today, where he will be questioned further on his outlook for the U.S. economy and the Fed's monetary policy.