The Federal Reserve may raise interest rates next week, but a mixed report on US inflation on Thursday helped Asian markets. However, the still-hot figure left open the potential of another rate hike before the year is out.
Despite the fact that the data did not definitively support further tightening, analysts claimed that traders were encouraged by having successfully navigated a significant obstacle, giving risk assets much-needed support.
The statement from Wednesday indicated that consumer prices increased as a result of a rise in oil prices, but core inflation, which excludes energy and food, was somewhat more than anticipated but still acceptable. Despite dealers’ continued nervousness, Wall Street closed the day broadly higher.
Analysts had a mixed reaction to the numbers as well.
“These data are supportive of a pause in September,” said Rubeela Farooqi of High Frequency Economics.
“However, unless it sees further proof of progress toward the two percent target, the (policy committee) is not likely to declare victory. They will continue to be willing to raise rates if necessary.
Even while I still believe the Fed will hold the line on interest rates next week, Neil Wilson of Markets.com noted that “the implication may be that the Fed will be more minded to keep a rate hike on the table for this year.”
The core CPI is a little underwhelming, according to Kathy Bostjancic of Nationwide Life Insurance.
“This will keep the Fed on hawkish alert and suggests a rate hike is possible in November and December.”
The focus now shifts to the Fed decision next week, which will be scrutinized for potential hints about its plans for the rest of 2023, even though figures on wholesale prices and retail sales are still expected this week.
Since the Fed has insisted that its decisions will be based on new data, any indication that prices are beginning to rise will probably alarm markets.
According to observers, there are extremely few chances of a hike occurring next week, but there are roughly 50% of chances for a hike in November.
Although the initial gain waned as the morning went on, Asian shares saw some early buying with indexes all rising.
According to Kyle Rodda of Capital.com, “Asia has some clear air to reclaim some of the losses from the week.”
The metaphorical can has been slightly pushed down the road thanks to US inflation, which raised more concerns than it did answers.
The European Central Bank is scheduled to wrap up its most recent policy meeting later in the day. The region is now experiencing an increase in cost pressures as a result of the rebounding energy prices, which are mostly attributable to Saudi Arabia and Russia’s output cuts.
Crude prices are still high, having reached 10-month highs, and some analysts have warned that they may potentially return to $100.
- Important data about 2:30 GMT
Nikkei 225 in Tokyo is up 1.1 percent at 33,049.01 (pause).
Hong Kong’s Hang Seng Index increased by 0.3% to 18,061.24.
Composite for Shanghai is up 0.2 percent at 3,130.17.
Dollar/yen: down from 147.47 yen on Wednesday to 147.12 yen.
Dollar/euro: up at $1.0737 from $1.0733
Dollar/pound: up from $1.2490 to $1.2493
Up from 85.91 pence to 85.94 pence for the euro/pound.
At $88.95 per barrel, West Texas Intermediate is up 0.5 percent.
At $92.32 per barrel, Brent North Sea crude is up 0.5 percent.
New York’s Dow: At closure, it was down 0.2 percent at 34,575.53.
London’s FTSE 100 closed FLAT at 7,525.99.