Asian stocks sank Thursday (Sep 21) and the dollar advanced after the Federal Reserve indicated it could hike interest rates again this year and keep them elevated longer than feared as it struggles to bring inflation to heel.
With the world’s number-one economy still in rude health and the labour market showing few signs of softening, central bank officials appeared confident they had enough room for further policy tightening without causing a recession, analysts said.
The Fed’s much-anticipated meeting finished Wednesday with borrowing costs held at a two-decade high – as expected – but the board’s “dot plot” guide to future rates pointed to another lift and just two cuts next year, instead of the four previously anticipated.
The hawkish tilt dealt a blow to sentiment among traders, who have feared more restrictive measures following a string of data showing that 11 hikes in 18 months were not having the desired impact on inflation, which is still well above the bank’s 2 per cent target.
“We are prepared to raise rates further, if appropriate, and we intend to hold policy at a restrictive level until we’re confident that inflation is moving sustainably toward our objective,” Fed chief Jerome Powell told reporters after the decision.
All three main indexes on Wall Street ended sharply lower, with the Nasdaq losing more than 1 percent as tech firms took a hit owing to their susceptibility to higher borrowing costs.
Asia followed suit. Tokyo, Hong Kong, Shanghai, Sydney, Seoul, Mumbai, Jakarta, Singapore and Taipei all retreated.
KLSE retreated, at 5pm, the FBM KLCI had fallen 3.35 points to 1,448.21, from Wednesday’s close at 1,451.56. The index opened 1.21 points better at 1,452.77, and moved between 1,446.80 and 1,453.97 throughout the day.
