Asia Open
The Asian session was set for a mixed start, with Nikkei -0.50%, ASX +0.09% and KOSPI -0.31% at the time of writing, following a volatile session in Wall Street. The conclusion of the US Federal Reserve (Fed) meeting overnight was the highlight, which saw policy rate unchanged at 5.25%-5.50% in a widely expected move, but comments seem to offer takeaways for both the bulls and the bears.
For one, the central bank noted a “lack of further progress” towards its inflation objective and wants to seek for greater confidence in the data before considering rate cuts. That very much anchored market rate expectations for potentially having only one 25 basis point (bp) rate cut in 2024.
However, the Fed also reflected a high threshold for additional rate hikes despite the recent run in persistent inflation, seeing rate hike as “unlikely”. That may offer some calm that policy settings will not get more restrictive. It also indicated to slow its quantitative tightening (QT) process to a monthly run-off of $25 billion for Treasury securities from $60 billion.
Overall, the outcome offered somewhat of a middle ground, with the Fed walking back on earlier rate cuts from the previous March meeting, but overall tone still seems less hawkish that what markets were expecting. The announcement for a tapering of its QT process has put a cap on Treasury yields, which dragged the US dollar 0.6% lower overnight.
