(Updated at 1500 EST)

By Karen Brettell

March 6 (Reuters) -

Longer-dated U.S. Treasury yields fell to one-month lows on

Wednesday after Federal Reserve Chair Jerome Powell said that

continued progress on inflation "is not assured," though the

central bank still expects to reduce its benchmark interest rate

later this year.

"If the economy evolves broadly as expected, it will likely

be appropriate to begin dialing back policy restraint at some

point this year," Powell said in testimony to the House

Financial Services Committee.

"Powell pretty much straight out said that they're done with

rate hikes. That's a big risk the market was concerned with,"

said Marvin Loh, senior global macro strategist at State Street

in Boston.

"Certainly, they feel that policy is restricted enough that

it's going to do its job. It's just a matter of how long it's

going to take," Loh added.

Investors are evaluating when the U.S. central bank is

likely to begin cutting rates.

Fed funds futures traders see a 70% probability the

first cut will come by June, according to the CME Group's

FedWatch Tool.

Friday's jobs report for February may provide the next

clues. It is expected to show that employers added 200,000 jobs

during the month, according to economists' polled by Reuters.

Private payrolls increased by 140,000 jobs last month

after rising by an upwardly revised 111,000 in January, the ADP

Employment report showed on Wednesday.

Other data on Wednesday showed that U.S. job openings fell

marginally in January, while hiring declined as labor market

conditions continue to gradually ease.

A Fed survey also found that U.S. economic activity

increased slightly

from early January through late February.

Will Compernolle, a macro strategist at FHN Financial in New

York, said that markets are concerned that growth may

"overheat," but adds that this would only be problematic if

inflation is also high.

Thus, next week's Consumer Price Index (CPI) for February is

key for future Fed moves and market sentiment.

"If the employment report comes in mostly as expected it all

hinges on Tuesday's CPI, because that shows whether this strong

growth is something to be worried about or whether it is

something to celebrate," Compernolle said.

The CPI is expected to show that headline prices rose 0.4%

last month, while core prices gained 0.3%.

Benchmark 10-year yields were last down 3 basis

points on the day at 4.108%, and got as low as 4.079%, the

lowest since Feb. 7.

Two-year yields gained 1 basis point to 4.552%

after earlier dropping to 4.510%, the lowest since Feb. 15. The

inversion in the yield curve between two-year and 10-year notes

deepened by five basis points to minus 45 basis

points.

The amount banks and fund managers lent to the Fed in its

reverse repurchase agreement facility ticked up on Wednesday to

$456.85 billion.