(Reuters) – Traders added to bets that the Federal Reserve will start U.S. interest-rate cuts next month with a quarter-point reduction in the policy rate, rather than a bigger half-point cut, after the U.S. central bank's preferred gauge of inflation for July showed inflation rose in line with economist expectations even as consumer spending increased solidly. Traders continued to see the Fed cutting rates by a full percentage point over the final three meetings of the year. Fed Chair Jerome Powell last week said "the time has come" to ease policy.

(Reporting by Ann Saphir; Editing by Ros Russell)