The Federal Reserve said the recession in the US was easing, offering some hope of a pick-up in the global economy, and South Korea said its economy would shrink by less than previously forecast.
Asian stock markets rose for a second day yesterday, buoyed by signs the Fed was becoming less concerned about the state of the world’s biggest economy and an unexpected jump in US durable goods orders last month.
The Fed kept interest rates near zero on Wednesday and signalled less concern on deflation, considered a threat to the economy because a pattern of falling prices causes consumers and businesses to delay purchases, dragging the economy down further.
The US central bank also stuck to, but did not increase, its huge program of buying government and mortgage debt, which is designed to keep borrowing costs low and boost recovery.
“Information received since the Federal Open Market Committee met in April suggests that the pace of economic contraction is slowing,” the Fed said in its policy statement at the end of a two-day meeting. “Conditions in financial markets have generally improved in recent months.”
US weekly jobless claims data, due at 1230 GMT yesterday, would give another read-out on the economy. Last week saw a surprise decline in the number of people claiming benefits.
Mixed economic indicators have kept global investors guessing about the markets’ direction.
Data on Wednesday showed new orders for long-lasting US manufactured goods rose unexpectedly by 1.8 percent last month, surprising analysts who had expected a fall of 0.6 percent.
A separate report showed that US mortgage applications climbed last week from a seven-month low, adding to signs that the three-year housing market slump may be abating.
But another set of data showed sales of new single-family homes in the US slipped last month, underscoring that conditions in the housing market were still fragile.
Meanwhile, South Korea upgraded its economic forecast for this year yesterday, saying its economy was expected to contract 1.5 percent, compared with a previous forecast of 2 percent. That would still mark the worst performance since 1998, when the economy contracted 6.9 percent.
“The economic downturn has eased, with some indicators pointing to an improvement, but the recovery is still weak,” the Ministry of Strategy and Finance said in an outlook report.
“We will maintain expansionary policy for a while as uncertainties linger internally and externally, and strive to normalize the macroeconomic policies over time when the recovery becomes visible,” it said.
The ministry left its forecast for 4 percent growth next year unchanged. The central bank has for four months kept its key interest rate at a record low of 2 percent.
“Thanks to stabilizing financial markets and expansionary macroeconomic polices, some indicators are showing signs of improvement,” South Korean Finance Minister Yoon Jeung-hyun told a press conference.
“Unlike other countries, our economic growth turned positive in the first quarter with a downturn easing and expectations growing for a recovery,” he said.
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