The investing world finished 2023 with a good degree of optimism after what was a largely turbulent year. Analysts, money managers, and regular investors mostly responded positively to statements from United States Federal Reserve officials, including chairman Jerome Powell, that suggested interest rate cuts were on the way in 2024. However, Asia markets and their worldwide peers were shaken somewhat by statements this year.
Federal Reserve Governor Christopher Waller said on Tuesday, January 16 that the Fed would look to cut interest rates providing inflation does not climb higher. “With economic activity and labor markets in good shape and inflation coming down gradually to 2%,” said Fed Governor Christopher Waller. “I see no reason to move as quickly or cut as rapidly as in the past.”
Asian markets were mixed to open the trading day on Thursday, January 18. The Shanghai Composite Index was down 0.90% in mid-afternoon trading in Shanghai, China. The index has dropped 13% year-over-year at the time of this writing. Investors in Asia will be watching statements on interest rate closely in the months ahead. However, other Fed officials have also tamped down expectations of an interest rate hike in 2024.
New York Fed President John Williams said on Wednesday, January 17 that he only sees interest rate cuts happening when the Fed is confident that inflation is moving towards the 2% target. He also said that the Fed would “need to maintain a restrictive stance of policy” until these preconditions are met.
