“Asian Markets Plunge as Investors Brace for Prolonged High Interest Rates”
Quick Summary
the Fed will have to continue to be vigilant about it.”
Asian markets dropped on Friday due to two Federal Reserve officials indicating more interest rate hikes may be necessary to reduce stubbornly high inflation. Data from the US showed that wholesale prices had eased slightly last month, but were still higher than expected. This, combined with other figures showing consumer prices dropping slower than expected, retail sales surging, jobs creation smashing estimates and unemployment claims coming in on the soft side, led to the realization that more rate hikes were needed to bring inflation back to the two percent target. This has raised fears of the US economy tipping into a recession. James Bullard and Loretta Mester of the St Louis and Cleveland Fed respectively, warned that the Fed will have to be “vigilant” in its “long battle against inflation”.
Full Story – Asian markets drop as traders eye higher-for-longer rates
Asian markets fell Friday on the prospect of more interest rate hikes after two Federal Reserve officials hinted at ramping up its monetary tightening campaign in the face of stubbornly high inflation.
Data showing the US wholesale price index eased slightly last month but rose more than forecast, reinforcing the view that the central bank still had much more work to do to defeat inflation — even after almost a year of lifting borrowing costs.
The reading came as other figures from the United States showed consumer prices came down slower than expected and retail sales surged, while jobs creation smashed estimates and unemployment claims came in on the soft side.
Markets last month rallied on hopes the Fed would be able to pause its hiking cycle soon — or even cut rates by the end of the year — but now there is a realisation that more increases are needed to get inflation back to the bank’s two percent target.
“You will not sustainably get to two percent inflation when you have a labour market that is this tight,” Steve Chiavarone, of Federated Hermes, told Bloomberg News. “It is so completely out of whack.”
The tighter policy environment has renewed fears on trading floors that the US economy will tip into recession.
St Louis Fed boss James Bullard and his Cleveland counterpart Loretta Mester on Thursday became the latest monetary policymakers to warn further hikes were in the pipeline.
Bullard warned: “My overall judgment is it will be a long battle against inflation, and…
