Asian traders cautious as Fed's Powell warns of possible interest rate hike increase

March 09, 2023 (MLN): Asian traders were cautious on Thursday ahead of key US jobs data at the end of the week, following warnings from Federal Reserve Chairman Jerome Powell that the central bank may increase the pace of interest rate hikes if the economy does not slow down.

Powell's comments came after a string of forecast-beating indicators shattered hopes that the US central bank could pause its tightening campaign soon and even cut borrowing costs by the year's end.

Markets have been falling since the start of February, and the prospect of rates going ever higher has ramped up fears that the world's top economy could tip into recession. Bond markets suggest a contraction is on the cards, and analysts are predicting rates could reach six percent from the current 4.5-4.75%.

Powell reiterated monetary policymakers' determination to quell inflation, saying that the decision would be driven by data, with a close eye on the labor market.

He warned that if the totality of the data were to indicate that faster tightening is warranted, the Fed would be prepared to increase the pace of rate hikes.

Traders are now awaiting Friday's non-farm payrolls figures for February, with a strong reading likely to put pressure on the Fed to hike by 50 basis points. In a worrying sign for risk appetite, a report on the private sector showed a bigger-than-expected jump in jobs last month, while wage growth remained solid.

After a tepid day on Wall Street, Asian markets were mixed, with Hong Kong flat and Shanghai falling. Tokyo, Sydney, Bangkok, and Jakarta rose, while Singapore, Seoul, Wellington, Taipei, Mumbai, and Manila fell.

Growing concerns about rising rates causing a possible recession were keeping pressure on oil prices, which struggled to make inroads on Wednesday's big losses.

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