Asian equities yesterday rose, while London and Frankfurt hit fresh highs as traders took in stride a warning from US Federal Reserve Chairman Jerome Powell that the US central bank was in no hurry to cut interest rates.
The remarks, reflecting similar sentiments from another top monetary policymaker, came a day before the release of closely watched inflation data and reinforced expectations that US borrowing costs would likely remain elevated for some time.
Asia’s gains came despite worries about where US President Donald Trump’s next tariffs salvo would land after he imposed 25 percent duties on aluminum and steel imports, and said he was considering further measures.
Photo: AFP
Powell told US senators at a congressional hearing that with policy “now significantly less restrictive than it had been and the economy remaining strong, we do not need to be in a hurry to adjust” rates.
“We know that reducing policy restraint too fast or too much could hinder progress on inflation,” he said. “At the same time, reducing policy restraint too slowly or too little could unduly weaken economic activity and employment.”
The Fed cut rates three times last year as inflation continued to slow and the labor market softened, but expectations for more reductions over the next 12 months have been pared because progress is slow.
Observers said worries that Trump’s tariffs — and plans to slash taxes, regulations and immigration — could reignite prices had also played a role in traders scaling back their rate-cut bets.
Futures traders place a probability of just more than 55 percent that the Fed would make no more than a one-quarter-point cut this year, data from CME Group showed.
New York Federal Reserve President John Williams on Tuesday said that the economy and consumer spending remained strong going into this year, adding that inflation would continue to ease to the bank’s 2 percent target.
However, “it will take time before we can achieve that target on a sustained basis,” Williams told a conference in New York, according to prepared remarks, adding that he did not expect the target to be reached this year.
Readings on the US consumer and producer price indices due this week would be pored over for an idea about the Fed’s plans, while Powell was yesterday to deliver a second day of testimony in Washington.
Hong Kong yesterday led gains across most Asian markets thanks to another rally in its tech firms, while Shanghai, Tokyo, Sydney, Seoul, Singapore, Mumbai, Manila and Jakarta were also well up. Wellington was flat, but Taipei edged down.
London and Frankfurt extended gains at the open, having finished at a record high on Tuesday. Paris also rose.
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