SINGAPORE – Asian equities inched lower on Wednesday ahead of a crucial US inflation report that will likely influence the Federal Reserve’s monetary policy path, with markets wagering another hike in interest rates at the central bank’s next meeting.
MSCI’s broadest index of Asia-Pacific shares outside Japan was 0.17 percent lower in choppy trading. Japan’s Nikkei was 0.49 percent higher, while Australia’s S&P/ASX 200 index rose 0.65 percent.
China shares were mixed at the open, with the Shanghai Composite Index up 0.1 percent while Hong Kong’s Hang Seng Index lost 0.02 percent. Data on Tuesday showed China’s consumer inflation in March was at its slowest since September 2021.
After Friday’s jobs report showed a resilient US labor market, emboldening bets of a 25 basis point hike at the Fed’s next meeting in May, investor attention is firmly on the March inflation report due later in the day.
The consumer price index is expected to show core inflation rose 0.4 percent on a monthly basis and 5.6 percent year-over-year in March, according to a Reuters poll of economists.
“Investors are hopeful that Wednesday’s inflation data could signal that the Federal Reserve was getting near the end of its rate hike cycle,” said Harry Ottley, an economist at Commonwealth Bank of Australia, noting focus continues to shift from banking wobbles in March back to the inflation problem.
Markets are now pricing in a 66 percent chance of the Fed raising interest rates by 25 basis points in May and then pausing for the subsequent meetings, according to the CME FedWatch tool.
Philadelphia Federal Reserve Bank President Patrick Harker on Tuesday said he feels the US central bank may soon be done raising interest rates, but reiterated the desire to bring inflation back to its 2 percent target.
The Fed last month raised interest rates by a quarter of a percentage point, taking it to a range of 4.75 percent to 5.00 percent.
