Asian stocks build on Wall St records after US inflation data

HONG KONG, China — Asian traders extended a rally across world markets Thursday as they welcomed figures showing US inflation slowed further last month, tempering concerns about the Federal Reserve's forecast of just one interest rate cut this year.

The weaker-than-expected May consumer price index marked a second successive month of slowing -- to a more than three-year low -- and boosted optimism that the central bank would be able to soften monetary policy after a long-running campaign of tightening.

The figures also calmed investors spooked by last Friday's blockbuster non-farm payrolls data that indicated the labour market remained tight and the economy in rude health, making it harder to lower borrowing costs.

However, the Fed later in the day released its keenly awaited "dot plot" outlook for interest rates, which showed that decision-makers saw just one cut this year -- down from three predicted in its previous guidance in March.

They pencilled in a median of four cuts next year and four in 2026.

Bank boss Jerome Powell welcomed the inflation data but added that officials needed to see more "good inflation readings" before they would be confident enough to consider reducing.

The "dot plot" saw the S&P 500 and Nasdaq come off their intra-day highs, though they still managed to chalk up a third successive record close, with analysts saying the positive run of inflation data could allow the bank to cut more.

"Patience is a virtue, and it is still one that the Fed seems to hold as it outlined confidence in an economy and inflation that are on the right path," said Kerry Craig at JP Morgan Asset Management.

"The Fed could still move two times this year if inflation figures continue to soften, and... Powell did not come across as hawkish in the press conference. The markets should take away the impression of a central bank that is still on a policy easing path, even if it is coming later."

And Lon Erickson, at Thornburg Investment Management, added: "Powell specifically commented that the labour market can weaken very quickly and the Fed is not waiting for that.

"I suspect this means the Fed is at or near the point in progress on inflation that it would be