HONG KONG: Equities wavered in Asia on Thursday (Sep 18) after the United States Federal Reserve (Fed) lowered interest rates but left investors wondering how many more cuts were in the pipeline despite boss Jerome Powell warning about the struggling jobs market.
On the heels of recent economic reports showing weaker job growth, the US central bank said it would lower borrowing costs 25 basis points, its first reduction since December.
The 11-1 decision to cut – US President Donald Trump’s appointee Stephen Miran voted for a 50-point cut – came even as inflation runs well above policymakers’ two per cent target, but analysts said the main focus was on jobs.
In its post-meeting statement, the Fed said “downside risks to employment have risen” and inflation has picked up and “remains somewhat elevated”.
Powell said in a news conference that the pass-through of tariffs to consumers had been slower and smaller than expected.
“Labour demand has softened, and the recent pace of job creation appears to be running below the break-even rate needed to hold the unemployment rate constant,” he told reporters.
The bank’s closely watched forecast for future rates showed some division on the path forward, with a narrow majority of the 19 officials assessing the outlook eyeing two more cuts but seven projecting none.
Powell remained cagey, saying decision-makers were approaching it “meeting by meeting”.
Michael Pearce of Oxford Economics said the figures showed a “stark divide” that was “unusual” and that the October move could depend on jobs figures.
US markets ended on a tepid note, with the Dow up but S&P 500 and Nasdaq down.
Asian investors were also cautious.
Tokyo closed in the green as the Fed decision boosted the dollar against the yen and other currencies, helping Japanese exporters, while Shanghai initially swung in and out of positivity, but ultimately retreated by day’s end.
Hong Kong was down as well.
Seoul closed at a record high, fuelled by a tech stock surge led by Samsung Electronics and chipmaker SK Hynix, which soared nearly 6 per cent, following reports that China banned its tech firms from purchasing Nvidia chips.
Taipei and Manila rose, while there were losses in Jakarta, Sydney, Singapore and Wellington.
London, Paris and Frankfurt opened on the front foot.
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