Asian markets yesterday were mixed, while the US dollar held strong gains after the US Federal Reserve brought forward its forecasts for hiking interest rates, as it looks to prevent overheating in the US economy, which is enjoying a blockbuster recovery.
After a much-anticipated meeting, top bank officials maintained their ultra-easy monetary policy, and repeated their belief that the sharp spikes in inflation were expected as businesses reopen and people return to their daily lives.
Officials have for months pledged not to budge from their highly accommodative measures and would stay the course until unemployment is tamed and prices are rising excessively for a long period of time.
Photo: AFP
However, with the rebound looking well established, they have lately edged closer toward tapering policy, and Wednesday’s meeting highlighted that.
The closely watched “dot plot” of policymakers’ forecasts for interest rates showed 11 of the 18 committee members expected at least two hikes in 2023.
As recently as March, estimates showed only seven officials seeing a liftoff in 2023. Now there are seven who see next year as a target.
After the meeting, US Federal Reserve Chairman Jerome Powell said that the projections “do not represent a committee decision or plan,” but that the bank was ready to alter policy if it sees signs of inflation moving “materially and persistently beyond levels consistent with our goal” of 2 percent.
Inflation has surpassed that for the past three consecutive months and hit a 13-year high last month.
Since inflation has lagged the bank’s target for more than a decade and unemployment remains at 5.8 percent, achieving “substantial further progress is still a ways off,” Powell told reporters in his news conference following the meeting.
He said that the “recovery is incomplete” and improvement has been “uneven,” with employment in hard-hit sectors well below pre-COVID-19-pandemic levels.
The Fed officials’ median forecast for annual inflation this year increased to 3.4 percent from the previous 2.4 percent in March, but they see the rate slowing to 2.1 percent next year, according to the projections.
Committee members also boosted their growth outlook to 7 percent from 6.5 percent.
Powell also said that the board had started talking about when to wind in its bond-buying scheme, which along with low rates and vast government stimulus has been crucial to driving a more than year-long rebound in equities from their lows in April last year.
The Fed would give plenty of notice before making any major changes, and would “do what we can to avoid a market reaction,” he said.
“Powell’s press conference delivered a handful of dovish reminders: vaccinations have a ways to go, that the base case is still that inflation is driven by reopening momentum and that they are ways away from substantial further progress,” OANDA Corp strategist Edward Moya said.
All three main Wall Street indices ended in the red, but off their earlier lows.
After an initial sell-off, Asian markets also pared or reversed losses.
Asian markets were mostly down, but also paring initial steep losses, as traders see the tightening measures are being debated owing to the positive economic outlook.
Jakarta, Manila, Mumbai, Seoul, Singapore, Sydney, Tokyo and Wellington were all in the red, while Taipei, Bangkok, Hong Kong and Shanghai edged up.
Frankfurt, London and Paris all fell soon after the opening bell.
The prospect of higher US rates sent the US dollar surging against the yen, British pound and euro, and maintained its strength in Asia, while rallying across the board against other units.
It was up more than 1 percent against the South Korean won, Australian dollar, Mexican peso and South African rand, while the Indonesian rupiah, Thai baht and Canadian dollar were also under pressure.
The greenback’s rise also weighed on US dollar-priced oil, with both main contracts retreating from multiyear highs. Still, observers said they considered that the black gold would enjoy further upside owing to an expected pickup in demand as the world recovers from the pandemic.
BYPASSING CHINA TARIFFS: In the first five months of this year, Foxconn sent US$4.4bn of iPhones to the US from India, compared with US$3.7bn in the whole of last year Nearly all the iPhones exported by Foxconn Technology Group (富士康科技集團) from India went to the US between March and last month, customs data showed, far above last year’s average of 50 percent and a clear sign of Apple Inc’s efforts to bypass high US tariffs imposed on China. The numbers, being reported by Reuters for the first time, show that Apple has realigned its India exports to almost exclusively serve the US market, when previously the devices were more widely distributed to nations including the Netherlands and the Czech Republic. During March to last month, Foxconn, known as Hon Hai Precision Industry
Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) and the University of Tokyo (UTokyo) yesterday announced the launch of the TSMC-UTokyo Lab to promote advanced semiconductor research, education and talent development. The lab is TSMC’s first laboratory collaboration with a university outside Taiwan, the company said in a statement. The lab would leverage “the extensive knowledge, experience, and creativity” of both institutions, the company said. It is located in the Asano Section of UTokyo’s Hongo, Tokyo, campus and would be managed by UTokyo faculty, guided by directors from UTokyo and TSMC, the company said. TSMC began working with UTokyo in 2019, resulting in 21 research projects,
Ashton Hall’s morning routine involves dunking his head in iced Saratoga Spring Water. For the company that sells the bottled water — Hall’s brand of choice for drinking, brushing his teeth and submerging himself — that is fantastic news. “We’re so thankful to this incredible fitness influencer called Ashton Hall,” Saratoga owner Primo Brands Corp’s CEO Robbert Rietbroek said on an earnings call after Hall’s morning routine video went viral. “He really helped put our brand on the map.” Primo Brands, which was not affiliated with Hall when he made his video, is among the increasing number of companies benefiting from influencer
Quanta Computer Inc (廣達) chairman Barry Lam (林百里) yesterday expressed a downbeat view about the prospects of humanoid robots, given high manufacturing costs and a lack of target customers. Despite rising demand and high expectations for humanoid robots, high research-and-development costs and uncertain profitability remain major concerns, Lam told reporters following the company’s annual shareholders’ meeting in Taoyuan. “Since it seems a bit unworthy to use such high-cost robots to do household chores, I believe robots designed for specific purposes would be more valuable and present a better business opportunity,” Lam said Instead of investing in humanoid robots, Quanta has opted to invest