2 weeks Ago
Asian stocks surged on Thursday after the Federal Reserve made its first interest rate cut in four years a big one, creating what analysts say should be a path to a soft landing for the US economy. The dollar gained and long-dated bond yields rose as markets around the world welcomed the long-awaited action by the US central bank, which cut its benchmark rate by 50 basis points to a range of 4.75% to 5.
00%. The Stock Exchange of Thailand Index was up 11.94 points (0.
8%) to 1,447.71 at the midday break. Gold prices, which came within pennies of $2,600 an ounce before the Fed announcement, eased back to $2,558.
Thai selling prices were quoted at 40,500 baht per baht-weight (15.2 grammes), down 50 baht from the day before. Thai Deputy Finance Minister Paopoom Rojanasakul was quick to weigh in on the Fed decision, saying local interest rates should move in the same direction as global rates.
The central bank needs to coordinate with the finance ministry so that monetary and fiscal policies work in tandem to spark economic activity, Mr Paopoom told reporters. “Thailand’s policy interest rate must be consistent and appropriate with the global economic situation and the direction of global interest rates,” he said. The Pheu Thai government for months has been trying to nudge the Bank of Thailand to cut its key rate, now at 2.
50%, with no success. Its next rate meeting will take place on Oct 16. The Fed’s shift to interest-rate cuts bodes well for Asian assets as many are “underowned”, and have better earnings prospects and more room to benefit from US easing than their global peers, said money managers and strategists interviewed by Bloomberg.
The Fed’s decision to make its first cut a big one indicates less of a gloomy view about the US economy and provides greater insurance for a soft landing. The move will help offset many of the negative factors facing Asian assets including expensive valuations, China’s slowdown and growing trade tensions, they said. “The rate cut gives a clear signal to the financial markets, industrialists and householders that the Fed is supporting growth,” said Gary Dugan, chief executive officer at Global CIO Office in Singapore.
“The Fed’s action should be taken very positively by Asian markets.” Lower US rates in theory give emerging markets leeway to cut their policy rates to support growth. The MSCI gauge of regional stocks climbed as much as 1.
3% on Thursday, while Japan’s Topix jumped more than 2%, both outperforming the muted reaction of US shares to the Fed’s decision. Asian currencies were mixed, though all except Hong Kong’s have strengthened over the past month. The yen weakened as traders awaited a Bank of Japan decision on Friday.
New quarterly projections by the Fed indicate that rates will fall by an additional 50 basis points over its remaining two meetings this year. Chairman Jerome Powell cautioned against assuming big cuts would continue, and also signalled borrowing costs may need to remain higher than pre-pandemic norms. However, Asian central banks should now have more confidence to ease policy without worrying about currency pressures, analysts say.
“We’re recalibrating policy down over time to a more neutral level,” Mr Powell told reporters. “And we’re moving at the pace that we think is appropriate, given developments in the economy.”.
