Investors react to Fed decision

A currency trader monitors exchange rates in a trading room at KEB Hana Bank in Seoul on 13 March 2020.

JUNG YEON-JE | AFP via Getty Images

SINGAPORE – Shares in Japan and South Korea rose on Thursday when investors reacted after the US Federal Reserve’s policy committee voted to keep the short-term lending rate almost zero in an expected move.

The Nikkei 225 in Japan rose 1.4% while the Topix index added 0.93%. South Korea’s Kospi climbed 1.17% and the Kosdaq 0.83%.

Australian equities ranged from gains to losses, while the ASX 200 benchmark fell 0.26% as most sectors traded lower. But the energy and materials sub-index recovered from losses in the previous session to trade 0.59% and 0.45% respectively.

U.S. stocks rose overnight, pushing the Dow Jones industrial average above 33,000 to its first close, while easing treasury returns from earlier highs.

Fed decision

The Fed has raised its expectations for economic growth, but has indicated that there are unlikely to be any interest rate hikes until 2023.

Chairman Jerome Powell said he expects inflation to rise this year, in part because of soft comparisons between the previous year of the Covid-19 pandemic in 2020. However, he said it would not be enough to change the policy aimed at inflation does not change. higher than 2% for a period, if it helps to achieve a complete and inclusive work.

Four of the 18 federal committee members are seeking an interest rate hike in 2022, compared to just one at the December meeting, according to the “point plot” of individual members’ predictions. For 2023, seven members see a hike compared to five in December.

FOMC members predict each quarter where interest rates will go in the short, medium and long term. These projections are visually represented in maps and are called a dot plot.

“The FOMC statement is very similar to that of January,” Commonwealth Bank of Australia strategists wrote in a letter on Thursday morning. “The committee noted, however, that activity and employment indicators have recently risen. Nevertheless, the statement maintains that the ongoing health crisis continues to pose ‘significant risks to the economic outlook’ and that current levels of policy accommodation remain appropriate.”

“The combination of unchanged median dots and President Powell’s dull remarks has lowered yields on U.S. and U.S. bonds (after an increase in yields early in the day),” the CBA strategists said.

Currencies and oil

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