HONG KONG (AFP) – Asian markets turned negative yesterday amid Federal Reserve (Fed) concerns that United States (US) President Donald Trump’s tariffs and immigration measures could reignite inflation.
The losses come despite a second-straight record close on Wall Street and follow a recent rally as traders have rolled with the president’s latest tariff salvos, betting they are being used as negotiating tactics.
Minutes from the US central bank’s January meeting suggested officials were not likely to cut interest rates anytime soon – having reduced them at three successive meetings – citing worries about the impact of Trump’s policies.
Decision makers expected that “under appropriate monetary policy, inflation would continue to move toward (their target of) two per cent, although progress could remain uneven,” the minutes said.
But without referring to Trump by name, the minutes said policymakers raised concerns that “the effects of potential changes in trade and immigration policy” could complicate the disinflation process.
The remarks come after a number of economists warned that the Republican’s pledge to ramp up tariffs on trade partners while slashing taxes, regulations and immigration could fan inflation.
Traders see a roughly 80 per cent likelihood the Fed will make no more than two quarter-point cuts this year, according to CME Group.
The minutes also revealed that officials were mindful that the debt ceiling needed to be lifted to prevent the country from defaulting on its obligations, which could deal a hefty blow to the global economy.
The government hit its limit in January, but the Treasury has managed to keep things ticking over by using so-called extraordinary measures.
“The overall tone of the meeting minutes was unsurprising, considering that Fed chair Jerome Powell had said on no less than five separate occasions during the January press conference that the committee did not need to be ‘in a hurry’ to make further adjustments to policy rates,” said US economist at HSBC Ryan Wang.
While all three main indexes in New York rose, with the S&P 500 at another all-time peak, Asia stumbled.
