Most emerging Asian stock markets fell, following Wall Street’s weak performance overnight and a spike in US Treasury yields after Federal Reserve Chairman Jerome Powell signaled aggressive actions to contain broadening price pressures.
Powell said a half-point interest rate increase will be “on the table” when the Fed meets in May, adding it would be appropriate to move “a little more quickly” on tightening policy.
The comment comes at a time when most regional central banks have been wary of hiking rates despite exacerbating inflationary pressures caused by the war in Ukraine, as they seek to balance policy with economic growth.
With Fed officials sounding very hawkish, markets are now pricing in rapid Fed rate hikes over the coming months, said Khoon Goh, head of Asia Research, ANZ Banking Group.
“So, that definitely is going to add further pressure on Asian central banks to do something sooner rather than later,” he said.
Back in Asia, Indonesian shares fell about 1.2 percent, tracking a drop in global energy prices and after the central bank said it may hike its reserve ratio requirement if inflation spikes again.
Other stock markets in the region such as South Korea, Thailand and the Philippines fell between 0.2 percent and 0.9 percent.
Meanwhile, Chinese stocks recovered from early losses to rise about 0.2 percent, after the country’s central bank pledged to keep an accommodative stance to support economic growth.
Malaysian stocks erased early losses as data showed consumer prices in March rose less than expected, easing some pressure on the central bank to raise rates.
“Headline inflation remains rangebound, but underlying prices are steadily climbing, albeit from a low base,” analysts at Barclays said in a note.
“A better growth backdrop led by improving terms of trade should keep Bank Negara Malaysia on track to begin normalizing policy with a rate hike in May, but prevailing uncertainties make it a close call.”
