Asian markets rally with Wall St as Powell eases inflation fears

Asian markets rally with Wall St as Powell eases inflation fears

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HONG KONG: Asian shares rose on Wednesday, tracking a strong showing on Wall Street as Federal Reserve Chairman Jerome Powell said he was determined to rein in runaway inflation but pledged to maintain a healthy recovery in the world’s largest economy.

Global markets have had a rough start to the year after minutes of the central bank’s December meeting showed officials were terrified by months of persistently high prices that many fear could hit consumers and derail a rebound in growth.

They signal that policymakers want to speed up the monetary tightening cycle, including multiple rate hikes — four this year, some commentators say — and shrinking bond holdings on balance sheets, which help keep lending rates down.

Traders have been worried about the prospect of an end to ultra-easy policies that have helped fuel a two-year market rally and shore up the pandemic-battered economy.

But Powell managed to allay some of those concerns during his Senate reconfirmation hearing on Tuesday.

He said the economy was on a strong footing, and with inflation rising and employment recovering, “the economy no longer needs or wants the very highly accommodative policy”.

Inflation was “very near the top of the list” of risks to the economic outlook, he said, adding that the current rate is “very far above target”.

Prices are currently rising at their fastest pace in four decades owing to a number of pressures including surging wage growth, supply chain snarls and high energy costs.

The Fed expects a “return to normal supply conditions” in the coming months, Powell said, but “if we see inflation persisting at high levels longer than expected… we will use our tools to get inflation back”.

Traders saw the comments as less hawkish than feared, suggesting recent fears of a quick unwinding of monetary easing measures may have been overdone.

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