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JOHANNESBURG - Trading was subdued in Asia on yesterday as the optimism that characterised recent sessions was dealt a blow by data showing a resilience among US consumers that gives the Federal Reserve room to keep hiking interest rates.
Two reports showing inflation easing in the world’s top economy provided a springboard for world markets over much of the past week as investors took the readings to mean almost a year of monetary tightening was finally kicking in. But on Wednesday the commerce department said retail sales jumped far more than expected last month, suggesting Americans are still able to weather the higher inflation and interest rate environment.
That was compounded by comments from a top Fed official that she did not see the bank stopping hiking and indicating she was willing to push borrowing costs above five percent, from the current 3.75-4.0 percent.
San Francisco Fed President Mary Daly told CNBC: “Somewhere between 4.75 and 5.25 seems a reasonable place to think about as we go into the next meeting.
“And so that does put it in the line of sight that we would get to a point where we would raise and hold.
Discussion
“Pausing is off the table right now, it’s not even part of the discussion. Right now the discussion is, rightly, in slowing the pace,” she added.
Traders have for months grown increasingly fearful that the hawkish tilt by the central bank will cause a recession, and policymakers have made clear they are willing to keep lifting even if that means hurting the economy. Meanwhile, JPMorgan Chase said the United States would tip into a ‘mild’ recession in 2023 owing to the rate increases, adding that it saw the Fed easing policy the following year in 2024.”