BEIJING (Parliament Politics Magazine) – After the US central bank chairman declared it would keep raising interest rates to combat rising prices, shares in Asia have dropped.
The policies of the Federal Reserve will hurt some businesses and households, Jerome Powell warned.Â
Borrowing becomes more expensive if interest rates are high for people and businesses, which might stifle inflation and hinder economic growth.
On Monday, the Nikkei 225 index of Japan closed 2.7% lower.Â
In other parts of South-Pacific regions, the Kospi in South Korea and the ASX 200 in Australia both had declines of almost 2%, while the Hang Seng in Hong Kong experienced a 0.8% decline.
That happened after the major New York stock market indexes each decreased by over 3% on Friday after Mr Powell’s statement.Â
In a much-awaited address at a conference in Jackson Hole, Wyoming, Mr. Powell stated that the Federal Reserve could keep interest rates high “for some time” and was likely to continue raising them in the near future.
While the price increases would hurt American families and businesses, he claimed that the pain would be even worse if price stability was not restored.
The largest economy in the world by GDP is experiencing the highest inflation in four decades.Â
Head of economics and strategy at Mizuho Bank, Vishnu Varathan said, “Fed Chair Powell went for the jugular, communicating (an) uncompromising assault on inflation.”
He continued that justification for that relentlessly hawkish position was as simple as it was unambiguous.
Dan Wang, chief economist of Hang Seng Bank China told BBC that the investors were concerned about the slowing Chinese economy.
Due to the protracted Covid control, China’s economic outlook has gotten worse, necessitating more policy rate reductions. Without more rate cuts in China, domestic demand was too weak, she said.
Following a dramatic slowdown in economic growth during the second quarter of this year, China’s central bank reduced lending rates earlier this month.
Major Chinese producers of automobiles and smartphones have also been impacted by power outages in the Sichuan area.
Official data, over the weekend, revealed that from January to July of last year, the profits of Chinese industrial enterprises had decreased by 1.1%.
Government efforts to maintain economic growth are being severely hampered by the country’s real estate market problem.
