Asian markets mostly fell Wednesday as investors nervously awaited the outcome of the Federal Reserve’s latest policy meeting where it is expected to announce a speedier withdrawal of its massive financial support, just as the Omicron variant fans concerns about the economic recovery.
Pressure is mounting on central banks around the world to act in order to get a grip on runaway inflation, which has been sent soaring this year by a spike in energy prices, long-running supply chain snags and surging demand.
Data last week showed US consumer prices rose in November at their fastest pace in four decades, all but confirming that the Fed will aim to end its vast bond-buying programme sooner than expected, allowing it to begin lifting interest rates by mid-2022.
The prospect of the end of central bank largesse — put in place at the start of the pandemic — has been a huge drag on global equity markets for the past few months, bringing an end to a rally that saw many markets hit record or multi-year highs.
“The market is already expecting a faster… tapering to be announced and currently prices around three Fed hikes in 2022,” said National Australia Bank’s Rodrigo Catril.
“The (policy board) will also deliver a new set of forecasts, with the last two iterations in June and September resulting in economic upgrades with projected rate hikes brought forward.
“The data flow since June has essentially provided more evidence of inflationary pressures, thus the question is how much more hawkish is the Fed pivot going to be.”
However, OANDA’s Edward Moya added that there is a concern that the bank could make a wrong move, having finally rowed back on its long-running assertion inflation would only be temporary.
“The biggest worry for investors still remains that of a policy mistake by the Fed and that answer won’t happen until after the (policy) decision” and news conference, he said.
The Fed decision later Wednesday will be followed by the European Central Bank (ECB) and the Bank of England on Thursday. (©Philippine Daily Inquirer 2021)
