Following The Federal Reserve’s Rate Hike, Asia-Pacific Markets Traded Lower In Anticipation Of Future Increases

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After the United States Federal Reserve raised its reference interest rate by half a per cent to reach 15 years of record-breaking heights, Asia-Pacific markets dropped.

Today, the Hang Seng index plummeted by 1.4%, while in mainland China, the Shenzhen Component saw a slight rise of 0.3%, and Shanghai Composite experienced a decrease of 0.3%. 

As official data illustrated that retail sales drastically declined more than expected and industrial production was unsatisfactory; China’s yearly Central Economic Work Conference will be held privately for two days until this Friday, according to reports.

The S&P/ASX 200 plummeted 0.64% to 7,204.8. The Nikkei 225 in Japan dropped by 0.37% to 28,051.7. The Topix declined by 0.18% to 1,973.9 as investors assimilated trade data from South Korea and Japan, respectively, subsequently causing a dramatic decrease of 1.6%, pushing Kospi down to 2,360 97 points.

After Fed Chair Jerome Powell’s statement that more data was required before the Federal Reserve would alter its view on inflation, U.S.’s S&P 500 halted a two-day success streak and reached the bottom with significant averages at their lowest point of the session.

JPMorgan’s chief emerging markets economist Jahangir Aziz predicts that most emergent economies will experience pronounced disinflation during Q1 2023, with one notable exception – Asia. It is because inflation levels in Asia never reached extremes like those observed in Central Europe or Latin America.

The level of price inflation heading downward will be seen “strongly taking hold” in other emerging markets outside of Asia; I think that is going to be the big driver of how markets reprice emerging market assets,” Aziz said.

The Bangko Sentral ng Pilipinas (BSP) jolted the market with a 50 basis points increase to 5.5%, exceeding expectations based on a Reuters survey of analysts and taking the central bank’s key rate to its highest point in 14 years.

Jeremy Siegel, a Wharton School of Business professor, declared that while China’s economic reopening is slightly delayed, it is essential to keeping inflation in check here in the United States.

According to Siegel, the U.S. Federal Reserve will take further action by raising interest rates a quarter of a point in February’s meeting before changing direction again.

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