Fed soothes Asia market worries
Expectations the global economy will rocket have helped equities surge in recent weeks but optimism is giving way to concerns the rebound and an imminent government stimulus will fire inflation
Another Federal Reserve reassurance it would not hike interest rates until absolutely necessary buoyed Asian markets Thursday, while traders were also taking heart from positive developments on the vaccine front.
The Philippine market was closed yesterday for the commemoration of the 1986 People Power Revolt.
Expectations the global economy will rocket have helped equities surge in recent weeks, but optimism is giving way to concerns the rebound, and an imminent government stimulus, will fire inflation and force the central bank to reverse its ultra-loose monetary policy.
The prospect of higher borrowing costs down the line has sparked a sell-off across world markets, where observers were already worried that bubbles had developed and a correction was on the way.
US Federal Reserves boss Jerome Powell for a second day reiterated the policy board’s commitment to keeping the financial taps wide open until inflation was sitting persistently at its two percent target and unemployment had been tamed.
Price rises to persist
While agreeing that prices would rise as the economy returns to normal, he said that did not mean inflation would run away.
Rising prices are “a different thing from persistent high inflation, which we do not expect and if we do get, then we have the tools to deal with it.”
He pointed out that car prices had jumped because of a lack of microchips but that was a one-off and would not lead to inflation, which was “a process that repeats itself year over year over year.”
“It may take more than three years” to reach its targets, he said.
Powell’s colleagues at the Fed echoed his comments, with vice chair Richard Clarida upbeat about the economy but saying it would “take some time” to get back to a
pre-pandemic state.