Asian Shares fall as Fed Signals Low Rates

The Asian and Pacific Rim financial markets inched lower on Thursday by the late morning trade hours. Asian traders were digesting commentary from the U.S. Federal Reserve Board after their monetary policy and rate decision on Wednesday.

The Federal Reserve Board signalled, rather strongly, that they had no intentions of even “thinking about” raising the Fed Funds Rate (FFR) before 2022. The FFR is currently in a range of zero to 0.25 percent or effectively zero.

The benchmark Nikkei 225 index was down 0.95 percent by the late morning and the broader Topix index fell 0.87 percent.

In South Korea, the Kospi composite index, bucked the overall regional trend, as shares added 0.14 percent.

Elsewhere in the Asian and Pacific Rim, the Australian S&P ASX 200 fell over one percent as share tumbled 1.3 percent.

In Hong Kong, the Hang Seng index was down a fraction of a percent. Shares of NetEase, during their initial public offering (IPO) gained over nine percent. NetEase is a Chinese based internet company.

On the mainland, in China shares on the headline bourses were lower by late morning trade. The Shanghai composite fell nearly a quarter of a percent and shares on the smaller Shenzhen composite were down 0.24 percent.

Asian Traders React to the FOMC Rate Decision and Commentary

Yesterday the Federal Open Market Committee (FOMC), the monetary policy arm of the Federal Reserve, left interest rates and monetary policy alone. This was widely expected.

During Fed Chair Jerome Powell’s press conference, he signalled that the FOMC was not planning on raising rates until 2022. He also said that the Fed will do whatever they must to support an economic recovery.

With that said, the FOMC released their economic projections. They see the gross domestic product (GDP) slumping 6.5 percent this year but expanding by five percent in 2021.