HONG KONG - Stock markets mostly fell yesterday on renewed concerns that the Federal Reserve will hike rates again, while another weak batch of trade data compounded worries about the struggling Chinese economy.
The positive sentiment which fuelled a rally through much of July has given way to nervousness that while US inflation is coming down, officials will keep tightening monetary policy to make sure they have prices under control.
Those concerns were magnified Monday when Fed Governor Michelle Bowman repeated her weekend comments that she wanted to see “evidence that inflation is on a consistent and meaningful downward path”, and rates should be lifted again.
Talk of another increase has jolted the feel-good mood which came after the Fed’s latest policy meeting, when it said it would be more data-dependent in making decisions -- which many took as a hint it had finished raising rates.
Still, New York Fed chief John Williams told the New York Times he thought “monetary policy is in a good place -- we’ve got the policy where we need to be”.
In an interview published Monday, he added that it was “an open question” on whether rates needed to go even higher.
But he said if inflation continued to soften, then interest rates could start coming down next year or in 2025.
Analysts also warned that while the US economy remained in rude health after more than a year of tightening, there were still recession fears.
“There is no way the Fed can do the level of tightening that it’s done so aggressively, and not have some damage,” Kristina Hooper of Invesco told Bloomberg Television.
“That’s why I believe it’s going to be a bumpy landing.”
Wall Street’s three main indexes enjoyed a strong start to the week, with focus turning to the release of consumer price inflation due later in the week. A mixed jobs report on Friday left investors with little to gauge the Fed’s next move.
Adding to the negativity, data showed Chinese July exports plunged the most since early 2020, while imports sank for a ninth straight month.
The figures come as the economy is battered by weak demand at home and abroad, and represent the latest in a string of weak data, putting pressure on leaders to act. - Nampa/AFP