Global stocks and crude oil fell after the Federal Reserve signaled that tighter monetary policy could come earlier than expected, with the U.S. central bank forecasting significantly higher inflation this year.
Japan’s Topix index fell 0.6 percent and the Australian S & P / ASX 200 fell 0.3 percent in Asia-Pacific trading on Thursday. Futures for the Wall Street S&P 500 index fell 0.3 percent, while those for London’s FTSE 100 fell 0.5 percent.
The weakness among stock markets came after the Fed maintained its key interest rate pending at 0 to 0.25 percent on Wednesday. But the consensus among Fed officials has shifted toward one tax increases in 2023, pushed forward from a previous forecast of 2024 to the first.
Core inflation is forecast to be 3 percent this year, well above the 2.2 percent forecast in March, according to estimates by Fed officials.
U.S. Treasury yields, which rise when prices fall, stop after jump after the Fed’s announcement. 10-year U.S. Treasury yields were steady at 1.579 percent in Asian trade after rising nearly 0.1 percentage points in the previous session. The S&P 500 closed 0.5 percent lower Wednesday.
Jay Powell, Fed chairman, said there was “every reason to think we will be in a job market with very attractive numbers, with low unemployment, high participation and rising wages across the spectrum.”
The Federal Open Market Committee has also maintained its asset purchase program, introduced last year to stem the economic blow from Covid-19, unchanged at $ 120 billion per month. Powell said the program’s liquidation process will be “orderly, methodical and transparent,” adding that any changes will be reported “well in advance.”
“We don’t think the program’s downturn will create tangible stress for the economy or markets,” said Rick Rieder, official head of global fixed income investment at BlackRock. “The biggest risk today would be an overheating paradigm where it’s hard to predict how much income, or wages, could cost.”
Shares in China, where interest rates are higher guided entry from global investors looking for better returns, he dismissed the Fed’s announcement. The CSI 300 index of stocks listed in Shanghai and Shenzhen rose 0.3 percent after data showed new home prices across the country rose in May. Hong Kong’s Hang Seng index has changed little.
Expectations of tighter policy have also weighed on oil prices, with Brent crude, the international benchmark, down 0.4 percent to $ 74.12 a barrel. The Texas West Intermediate fell to the same grade at $ 71.86 a barrel.