Most Asian Markets Follow Wall Street's Rally After Fed's Rate Hike Signals

 Most Asian equities saw gains on Thursday after U.S. Federal Reserve Chairman Jerome Powell indicated that any increase in consumer prices due to tariffs would likely be temporary, despite the central bank lowering its growth forecast and raising inflation expectations. Recently, markets have been highly volatile, largely due to U.S. President Donald Trump’s aggressive trade policies, including imposing tariffs on imports from major partners, which have fueled concerns about a potential recession.

Some analysts also worry that Trump’s promises to cut taxes, reduce regulations, and limit immigration could reignite inflation, possibly prompting the Fed to adjust its monetary policy, with some even speculating that rate hikes might occur.

Following a key meeting on Wednesday, the U.S. Federal Reserve decided to leave borrowing costs unchanged for the second consecutive time and noted that "uncertainty around the economic outlook has increased." The Fed also revised its growth forecast to 1.7% for the year, down from the previously estimated 2.1%, and raised its core inflation projection to 2.8%, up from 2.5%. However, the Fed's outlook still anticipates two rate cuts this year.

Powell stated, “We do understand that sentiment has fallen off pretty sharply, but economic activity has not yet, and so we are watching carefully. I would tell people the economy seems to be healthy.” He added that inflation has “started to move up,” partly due to tariffs, but he believes any increase will be “transitory” and warned that it would be difficult to assess how much tariffs, compared to other factors, are driving price increases.

These comments were seen as supportive for the market, and U.S. Treasury yields dropped. This was further boosted by the Fed's decision to slow its pace of balance sheet reduction, reversing some of its pandemic-era bond-buying.

Late Wednesday, Trump called on policymakers to cut rates immediately, urging on his Truth Social platform to “do the right thing.”

Kerry Craig, a global market strategist at JP Morgan Asset Management, remarked, “The Fed doesn’t have all the answers but faces plenty of questions about how it is interpreting the shift in the U.S. economy and policy impacts. For now, the market seems reassured that the Fed is ready to act if needed.” He added, “Overall, the outlook remains uncertain.”

All three major U.S. indexes rose, and most Asian markets followed suit, with Sydney, Seoul, Singapore, Taipei, Wellington, and Manila all showing gains. Jakarta rose nearly 2%, extending Wednesday’s gains, although it remains under pressure, having dropped 10% in 2025 amid concerns about Indonesia’s economy.

Hong Kong retreated after a strong performance this year, with the Hang Seng Index up over 20%, and Shanghai also saw a drop. Tokyo was closed for a holiday.

The yen extended its gains from Wednesday after Powell's dovish comments, while the dollar weakened against both the pound and the euro. Gold hit another record high above $3,056, supported by lingering tariff concerns and geopolitical developments. Oil prices also rose following fresh hostilities in the Middle East, with Israel launching heavy strikes on Gaza after a ceasefire with Hamas. Traders are also monitoring Eastern Europe after Trump suggested that the U.S. could manage Ukraine’s nuclear power plants as part of a potential ceasefire agreement with Russia.

Zelensky expressed willingness to pause attacks on Russia’s energy infrastructure, a day after Putin agreed to halt similar strikes on Ukraine.