While strong USA jobs data last week led investors to trim bets of a 50 basis points rate cut by the Fed in July, Powell's remarks saw interest rate futures pricing in greater odds of an aggressive rate cut this month. In short, a tighter labor market with fewer available workers for hire should help push up wages which ought to lead to higher prices. "The main question now is, are investors pricing too much in terms of rate cuts by year end?"
In a single day stateside, the S&P 500 breached the 3,000 level for the first time, however, pared good points to close 0.5% higher at 2,993.07.
South Korea climbed 0.6 per cent, but Japan's Nikkei lagged with a loss of 0.15 per cent. E-Mini futures for the S&P 500 added a slim 0.08 per cent.
US equities rallied late to close at a record high, while Treasuries retreated after the latest American inflation reading came in hotter than anticipated.
"We're at a point where we're weighing whether the Fed will cut for insurance or if they're entering a period of structural, cyclical downturn in interest rates - I'm leaning more towards the latter", said Shyam Devani, senior technical strategist in Singapore. Among stocks, Britain's Reckitt Benckiser was among the biggest boosts after agreeing to pay up to $1.4 billion to resolve US federal probes in connection with the sales and marketing of an opioid addiction treatment by its former prescription drugs business Indivior. The MSCI Emerging Market Index increased 0.6 per cent. Yet, this only worked to diminish bets of a 50bps rate cut from the Fed at this month's interest rate decision. Expectations for a 50-basis-point cut, which had almost been snuffed out following stronger-than-expected USA employment data on Friday, jumped to 23.5%, according to CME Group's FedWatch tool.
Futures still fully price in a 25-basis-point cut at the Fed's July 30-31 meeting, but they no longer suggest a half-point move. Minutes from the central bank's last meeting further cemented expectations for a cut in borrowing costs.
The probability of a 25 basis point cut was 97.5% on Wednesday, with a 2.5% chance of a 50-point cut.
The greenback was down 0.35% at 108.080 yen, forced off a six-week high of 108.990 scaled the previous day.
Powel's comments come at a sensitive time for both the Fed and the USA administration, with President Donald Trump proposing that the U must also do some currency interventions to bolster the economy.
The dollar index.DXY, tracking the greenback against six major currencies, dropped 0.29%. It was still some distance from a six-month trough of 106.780 set on June 25.
The euro nudged up 0.1% to $1.1263 after gaining 0.4% on Wednesday.
Euro zone government bond yields also fell.
In fixed-income markets, the 10-year U.S. Treasury yield fell to 2.037% after dropping on Wednesday from a three-week high of 2.113%.
In commodities, US crude oil futures extended the previous day's large gains to touch $60.67 per barrel, their highest since May 23.
Brent crude LCOc1 futures rose 64 cents to $64.80, while USA crude CLc1 gained 82 cents to $58.65 a barrel.
London's FTSE edged up 0.2 per cent and Paris also rose after better-than-expected French industrial data.
Spot gold briefly touched $1,426 an ounce, its highest since July 3, on the reinforced expectations for a Fed rate cut.