The long cycle of falling interest rates in Asia could be over after the US Federal Reserve’s third rate increase in 15 months was followed quickly by monetary tightening in the world’s second-biggest economy, China.
The Fed’s widely anticipated rise of 25 basis points on Wednesday was also only its third since the global financial crisis, having reined in earlier temptations to raise rates out of concern for the effect on fragile emerging economies that still needed looser monetary conditions.
However, the Fed again signaled that such reticence is over, repeating its projections for at least two more rate increases this year as the US economy improves.
Photo: AFP
“At the very least, the Fed’s desire to step up the pace of policy normalization has changed the conversation at many central banks globally,” said Sean Callow, an economist with Westpac in Sydney.
“Further monetary easing is now largely seen as only if needed to ‘break the glass,’ not a plausible baseline,” Callow said.
The People’s Bank of China yesterday raised the rates on the short-term funding operations it conducts for the nation’s banks for a third time this year.
The Fed’s move would otherwise make it harder for China to stop its currency weakening and arrest a persistent outflow of capital. China also wants to cool a run-up in debt and the risk of a property bubble.
The Bank of Japan’s regular policy meeting yesterday opted to stand pat with its 0.1 percent short-term interest rate target and a loose commitment to keep buying bonds, though core inflation is far below its ambitious 2 percent target.
The Fed’s new policy path is a sea change for global markets used to a decade of easy money.
While emerging markets are showing some signs of strength, with a recovery in commodity prices and growth in exports, they are struggling to fire up domestic demand.
However, their freedom to fit domestic rates to local demand conditions is constrained by the need to keep hold of the foreign capital that flooded in seeking higher yields when developed world rates were at rock bottom.
They also need to prevent their currencies from tumbling against a rallying US dollar.
Super Typhoon Kong-rey is the largest cyclone to impact Taiwan in 27 years, the Central Weather Administration (CWA) said today. Kong-rey’s radius of maximum wind (RMW) — the distance between the center of a cyclone and its band of strongest winds — has expanded to 320km, CWA forecaster Chang Chun-yao (張竣堯) said. The last time a typhoon of comparable strength with an RMW larger than 300km made landfall in Taiwan was Typhoon Herb in 1996, he said. Herb made landfall between Keelung and Suao (蘇澳) in Yilan County with an RMW of 350km, Chang said. The weather station in Alishan (阿里山) recorded 1.09m of
NO WORK, CLASS: President William Lai urged people in the eastern, southern and northern parts of the country to be on alert, with Typhoon Kong-rey approaching Typhoon Kong-rey is expected to make landfall on Taiwan’s east coast today, with work and classes canceled nationwide. Packing gusts of nearly 300kph, the storm yesterday intensified into a typhoon and was expected to gain even more strength before hitting Taitung County, the US Navy’s Joint Typhoon Warning Center said. The storm is forecast to cross Taiwan’s south, enter the Taiwan Strait and head toward China, the Central Weather Administration (CWA) said. The CWA labeled the storm a “strong typhoon,” the most powerful on its scale. Up to 1.2m of rainfall was expected in mountainous areas of eastern Taiwan and destructive winds are likely
The Central Weather Administration (CWA) yesterday at 5:30pm issued a sea warning for Typhoon Kong-rey as the storm drew closer to the east coast. As of 8pm yesterday, the storm was 670km southeast of Oluanpi (鵝鑾鼻) and traveling northwest at 12kph to 16kph. It was packing maximum sustained winds of 162kph and gusts of up to 198kph, the CWA said. A land warning might be issued this morning for the storm, which is expected to have the strongest impact on Taiwan from tonight to early Friday morning, the agency said. Orchid Island (Lanyu, 蘭嶼) and Green Island (綠島) canceled classes and work
KONG-REY: A woman was killed in a vehicle hit by a tree, while 205 people were injured as the storm moved across the nation and entered the Taiwan Strait Typhoon Kong-rey slammed into Taiwan yesterday as one of the biggest storms to hit the nation in decades, whipping up 10m waves, triggering floods and claiming at least one life. Kong-rey made landfall in Taitung County’s Chenggong Township (成功) at 1:40pm, the Central Weather Administration (CWA) said. The typhoon — the first in Taiwan’s history to make landfall after mid-October — was moving north-northwest at 21kph when it hit land, CWA data showed. The fast-moving storm was packing maximum sustained winds of 184kph, with gusts of up to 227kph, CWA data showed. It was the same strength as Typhoon Gaemi, which was the most
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