From Malay Mail · · 3m
Asian markets brace for Fed rate hike amid inflation fears
Investors prepare for the Federal Reserve's first rate increase since 2023 as inflation and oil prices remain stubbornly high.
In brief
Investors prepare for the Federal Reserve's first rate increase since 2023 as inflation and oil prices remain stubbornly high. The Fed is expected to raise rates for the first time since 2023, driven by persistent inflation above target and Middle East tensions keeping oil above $100 per barrel. Originally reported by…
Fed poised to raise rates
The Federal Reserve is widely expected to lift borrowing costs for the first time since 2023. Inflation remains well above target while Middle East tensions keep crude above $100 a barrel.
Markets hit after strong rally
Global equities have taken a heavy blow after several markets hit record highs in the first half of the year. Speculation grows that officials could announce another rate hike before year end.
Warsh's hawkish Jackson Hole speech
Fed boss Kevin Warsh ramped up bets on a rate increase with a hawkish speech at Jackson Hole, Wyoming last month. Strong jobs data and stubborn inflation have since cemented expectations.
Traders see 90% hike probability
Markets are pricing in more than a 90 percent chance that Fed board members will choose to tighten monetary policy. The decision hinges on how many members vote to keep rates unchanged.
Treasury yields hit 2007 levels
Ten-year US Treasury yields pushed above five percent this week, reaching levels not seen since 2007 before the global financial crisis. Expectations of prolonged hot inflation drove the surge.
Asian stocks stagger on Fed eve
Asian equities wavered between gains and losses Wednesday after Wall Street and European sell-offs. Tokyo, Shanghai, Sydney and Manila fell while Hong Kong, Singapore and Taipei rose.
Bank of Japan also set to hike
The Bank of Japan is expected to raise rates Friday due to rising inflation and the need to support the yen. The currency hit a 40-year low in July before a historic Japan-US intervention.
Dollar could weaken on inflation doubts
If US inflation settles closer to three percent instead of the two percent target, investors may become less willing to hold dollars. Currency markets still price in a consensus of two percent.
“It is very possible that US inflation instead settles closer to three per cent.”
Oil dips but stays above $100
Oil prices dropped Wednesday but both main contracts remain well above $100 a barrel. The US and Iran remain at loggerheads while Saudi Arabia keeps a key pipeline closed following attacks.
Trump-Xi summit eyes tariff cuts
A planned summit between President Trump and Chinese counterpart Xi Jinping could yield tariff reductions on some goods. The two sides are looking at cuts on US energy and agricultural products.
The essence
The Fed is expected to raise rates for the first time since 2023, driven by persistent inflation above target and Middle East tensions keeping oil above $100 per barrel.
