Fed officials sought to downplay expectations that the US central bank will slash interest rates numerous times next year, sending stock markets down yesterday after last week’s gain.
While visiting the headquarters of KEB Hana Bank in Seoul, a currency trader walks by the screens that display the Korea Composite Stock Price Index. (Source: AP News)
Impacts on Stock Market
Investors are also watching the Bank of Japan (BoJ) meeting this week, but recent speculation that it could abandon its ultra-loose monetary policy has faded. A move is expected in the new year. Equities are expected to conclude the year on a high after the Fed recommended relaxing monetary policy following reports showing inflation falling and the economic soft landing. Analysts expected investors to ease down on Friday after tech firms climbed, sending the Dow and Nasdaq to record highs. Hong Kong fell 1% as did Tokyo, Shanghai, Sydney, Singapore, Mumbai, Manila, and Jakarta at the start of the week. Paris, Frankfurt, and London fell. But Wellington, Bangkok, and Singapore made tiny gains. Last week, Fed officials attempted to quell speculation that they may cut rates next year. Some projected six cuts, but the bank’s “dot plot” indicated three. New York Fed chairman John Williams told CNBC that “we aren’t really talking about rate cuts” and that it was “just premature to be even thinking about” a March cut, as some analysts have indicated
“If we see the progress I want, it would be natural to return monetary policy to normal levels over time”. Atlanta Fed president Raphael Bostic predicted two decreases from the third quarter, while Chicago Fed president Austan Goolsbee warned that policymakers would not act until inflation was under control. The BoJ’s decision is coming today, but analysts don’t anticipate it to change course from years of ultra-loose policy for several months. Officials have kept rates in negative territory and controlled bond prices to support the economy, but inflation and the yen are causing them to change course. Societe Generale economists suggested the BoJ need not rush policy reforms.
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