US manufacturing still looks healthy despite trade conflicts with China, Europe and Canada and a rising dollar that makes U.S.
U.S. President Donald Trump's top economic advisor, Larry Kudlow, also said on Wednesday that he believed Chinese President Xi Jinping has blocked progress on a deal to end duelling U.S. and Chinese tariffs.
The last rate hike occurred in June and at that time, the Fed moved its projection for future rate hikes this year from three up to four.
The tech-heavy Nasdaq composite notched a record high on Tuesday before closing up 0.63 percent to 7,855.12 and outperforming other USA indexes, which recorded slighter gains.
The central bank's preferred inflation measure rose 2.3 percent in the 12 months ended in May, up from 1.5 percent a year earlier.
While Powell steered clear of direct criticism of President Donald Trump's slapping of tariffs on goods, particularly from China but also from US allies in Europe and elsewhere, he acknowledged that tariffs were "absolutely" the wrong approach and said the United States "would feel it at the national level" if levies remained in place for too long. Economists had forecasthousing starts declining to a pace of 1.320 million units last month. Against the yen, the dollar traded at 112.92 at 9:42 a.m. HK/SIN.
"Dollar purchases continued" following Powell's congressional testimony, an official of a Japanese securities firm said.
"And while long-term Treasury yields are not rising prominently, this is a reflection of investor demand for US assets that generates a degree of dollar-buying".
"Higher short-term interest rates make the dollar more attractive relative to other currencies". As a result the US yield curve was the flattest in 11 years and close to inverting.
An inverted yield curve is sometimes seen as a sign of waning confidence towards the economy and a signal for a recession. The Sterling has suffered from losses after the government has faced an unanticipated downfall recently.
In forward market today, premium for dollar remained weak due to persistent receiving from exporters.
The kiwi rose to 51.97 British pence from 51.65 pence yesterday after United Kingdom inflation data missed forecast at an annual pace of 2.4 percent, prompting investors to pare back their expectations for future rate hikes.
On Wall Street, the Dow Jones Industrial Average rose 70.11 points, or 0.28 percent, to 25,190, the S&P 500 gained 4.42 points, or 0.16 percent, to 2,813.97, and the Nasdaq Composite dropped 1.74 points, or 0.02 percent, to 7,853.38.