* MSCI EM stocks index down 0.8% * Fed’s inaction could lead to more volatility - analyst * OPEC+ extends supply cuts, oil prices rise; Russian rouble up * Indian rupee, Turkey’s lira tick lower March 5 (Reuters) - Emerging market stocks hit two-month lows on Friday as U.S. Treasury yields rose further after Federal Reserve Chairman Jerome Powell said their recent spike did not warrant action yet, while Russia’s rouble firmed due to surging oil prices. MSCI’s index of EM shares fell as much as 1.6%, before cutting some losses, and was on track to end the week lower, with heavy-weight China blue-chips marking their third week in the red. Talking at a Wall Street Journal conference, Powell said on Thursday the Fed’s stance would stay accommodative until a sustained economic recovery was underway. He acknowledged a surge in U.S. bond yields, which has roiled markets of late, but said he did not consider it a “disorderly” move. “That was hardly the disciplinarian’s tone that some segments of the markets had hoped for, expecting the Fed Chair to try and rein in rising yields,” said Han Tan, a market analyst at online trader FXTM. “Such a stance is likely to leave the door open for further bouts of volatility.” With more stimulus in the pipeline and COVID-19 vaccines allowing more economic activity, investors are holding on to the narrative that inflation could make a roaring comeback, Tan said. U.S. Treasury yields jumped after Powell’s talk, before stabilising, while the dollar hit three-month highs against a basket of major currencies. Eyes will now be on U.S. non-farm payrolls data for February. Markets expect a bounce-back in employment growth and a steady unemployment rate at 6.3%. An index of developing world currencies touched 10-week lows. Oil importing countries such as India and Turkey saw their currencies slip after OPEC+ decided to extend supply cuts, sending crude prices to over one-year highs. The Indian rupee broke a four-day winning streak, while Turkey’s lira fell for the ninth session in 10. The lira has lost about 7.5% over the same period, pressured by risk-off sentiment and policy concerns. Oil producer Russia’s rouble rose 0.4%, bouncing back after a late sell-off on Thursday over media reports suggesting that western nations were considering additional sanctions against Moscow over the alleged poisoning of Kremlin critic Alexei Navalany. In EM debt, spreads in JPMorgan’s hard currency index came down 10 points over the past week. EM debts funds saw another week of outflows, at $148 million, as rising core yields pressured EM fixed income assets, Morgan Stanley said, noting that it was driven primarily by hard currency. Colombian assets will be watched after the finance ministry’s fiscal deficit forecast came in well above market expectations, raising expectations that the economy will lose its investment grade credit rating. For GRAPHIC on emerging market FX performance in 2021, see tmsnrt.rs/2egbfVh For GRAPHIC on MSCI emerging index performance in 2021, see tmsnrt.rs/2OusNdX For TOP NEWS across emerging markets For CENTRAL EUROPE market report, see For TURKISH market report, see For RUSSIAN market report, see (Reporting by Susan Mathew in Bengaluru; Editing by Subhranshu Sahu)