HONG KONG: Asian markets fell on Friday as a string of top Fed officials made the case to fight inflation, sparking fears the bank will embark on an aggressive campaign that could raise interest rates four times this year.
Federal Reserve Chairman Jerome Powell’s pledge this week to curb price surges while promoting a recovery in the world’s largest economy has provided a much-needed boost to investor sentiment and helped drive a stock market rally.
Data showing U.S. inflation appeared to be stabilizing added to positive sentiment about the end of ultra-easy monetary policy and eased concerns about a key factor in a market rally and a rebound in the global economy in the past two years.
But sentiment turned bleak on Thursday after officials made comments.
Lael Brainard, in her Senate hearing to become Powell s deputy, said rates could rise as early as March, a move supported by Fed Bank of Philadelphia chief Patrick Harker who also raised the possibility of another three before the end of the year.
The heads of the Chicago and St Louis Feds saw a similar number of hikes, while Raphael Bostic of Atlanta said he was open to a March move.
Minutes from the bank s December policy meeting showed officials were keen to act quickly to tame prices, and speed up the taper of its massive bond-buying programme, then begin offloading its Treasury holdings — measures that have been used to keep rates at all-time lows.
“A recent chorus of Fed speakers… have said they are open to raising interest rates in March, which means the possibility of four rate hikes this year is growing,” said OANDA s Edward Moya.
“With four (policy board) voters now expecting to hike in March, financial markets can t rule out it is possible that they could deliver five rate hikes this year.”