Asian shares retreated on Thursday after the Federal Reserve unexpectedly lifted its view on the economy, signalling that the U.S. central bank remains firmly on track with plans to raise interest rates this year. The Fed said falling energy prices boosted household purchasing power, even as it acknowledged a decline in certain inflation measures and added international developments would be taken into consideration.
“The markets were a bit surprised that the Fed was more hawkish than expected, especially considering that many people had thought that the board members this year would be more dovish than last year’s,” said Hideyuki Ishiguro, senior strategist at Okasan Securities. Four voting members from regional Feds at the policy committee this year are considered less hawkish than last year’s rotating members.
A greater likelihood of higher U.S. interest rates this year helped Asian stock indexes follow Wall Street into negative territory. Japan’s Nikkei slipped 0.7 percent and MSCI’s broadest index of Asia-Pacific shares outside Japan dropped 0.4 percent. The Dow Jones industrial average fell 1.1 percent to a six-week low while the S&P 500 lost 1.4 percent.
This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.