Asian markets mostly rose Thursday after the Federal Reserve cut interest rates, but, investors were left unsure about its next possible move. While the FED met expectations with its 25-basis-point reduction, the lack of strong forward guidance disappointed many, who were also concerned about a growing split in the policy board between hawks and doves.
Equity traders have spent much of this month in a positive mood, betting that central banks are taking a more accommodative tone with monetary policy to support the stuttering global economy. The European central bank unveiled a fresh round of bond-buying stimulus and another rate cut this month, and there had been hopes the fed would indicate a further reduction in borrowing costs this year.
FED boss Jerome Powell said the board did not expect a recession but trade uncertainty is creating “cross winds”, hitting business investment and exports. He added the bank will “will act as appropriate” to maintain economic growth.
“After raising rates nine times in the past four years, the fed kicked off the wave of global central bank easing with their dramatic Dovish Pivot in January, but simple rate cuts are now rather old-fashioned compared to the ECB’s comprehensive and complicated package of easing measures last week.” said Tim Foster at Fidelity International.
The bank of japan decided to hold fire after its own policy meeting Thursday but warned of headwinds including the China-US trade war and Britain possibly leaving the European Union without a divorce deal.
It said it would maintain its ultra-loose monetary policy, vowing to keep interest rates low at least until the spring of 2020, adding it would keep an eye on inflation and the economy going into its October meeting.