(Reuters) – Jamie McGeever
Pivot looks to the future of the Asian market? What pivot?
Federal Reserve Chairman Jerome Powell stepped up his fight against inflation in his Jackson Hole speech on Friday, making it clear that there would be no “shift” to a more accommodative policy stance anytime soon.
Instead, American households and businesses will have to endure some “pain” as the central bank raises interest rates to levels necessary to regain control of inflation.
You can add investors to this list, especially stock investors.
Asian markets are likely to fall sharply on Monday, following Friday’s losses on Wall Street. The S&P 500 fell 3.4%, its fifth-biggest decline in nearly two years, and the Nasdaq fell nearly 4% %. The Dow Jones fell points.
Powell has been blunt – whatever the collateral damage, inflation must be reined in. That means higher interest rates, higher unemployment and slower growth. “We have to keep going until the job is done.”
Powell and his colleagues are not alone. ECB board member Isabel Schnabel told an audience in Jackson Hole that the central bank must keep raising interest rates even if the economy slips into recession because inflation expectations are “worse” out of anchor.
Policymakers in Asia are in different situations, especially those in China and Japan. But some, like Bank of Korea Governor Lee Chang-yong, admit their path will be largely determined by the Fed.
Monday’s corporate calendar in Asia is light. If investors’ attention shifts from macro, it could turn to geopolitics – the U.S. Navy confirmed a Reuters report that two warships sailed through international waters in the Taiwan Strait on Sunday, a move that could anger China military.
Key developments that should give the market more direction on Monday:
Australian Retail Sales (July)
German inflation (August)