17/09/2026 04:14 AST
Most Asian stock markets rose on Thursday after the US Federal Reserve raised interest rates for the first time in three years. Fed Chair Kevin Warsh took a hawkish tone that boosted bets on another increase as policymakers try to tame surging inflation.
Hopes for more oil supply from Saudi Arabia also lifted sentiment, after the kingdom moved to restore some capacity on a pipeline it shut following drone attacks.
In a unanimous decision on Wednesday, the Fed raised borrowing costs for the first time since 2023, defying President Donald Trump's calls for cuts. Warsh stressed the need to fight inflation that has been "too high" for "too long."
"We removed a dose of accommodation so that financial and credit conditions would be more consistent with our ultimate objectives," Warsh said after the announcement. "Today's action starts to show we're serious about this, and we will deliver on the price stability objective."
The Fed's projections released with the decision showed that most policymakers expect at least one more hike to be needed before the end of the year. Traders now see an even chance of a rise in October.
Wall Street's three main indexes closed lower on Wednesday, but Asian investors reacted more positively to the 25-basis-point hike. Analysts said the move strengthened the central bank's credibility and offered some reassurance that officials are determined to beat inflation.
Yields on long-term government bonds, which hit two-decade highs this week, fell as investors lowered their inflation expectations. Inflation is currently 3.4 percent, well above the Fed's target of 2 percent.
"Removing a dose of accommodation is not the language of a central bank that believes it has completed the job," said Stephen Innes of Quintex Intel. "It suggests policy was still providing support before Wednesday and may not yet be restrictive after it. The hike removed the immediate credibility question. The explanation created a new argument about how much tightening remains."
Christian Scherrmann of DWS said: "Overall, we believe the main motivation this time was credibility, given bond market pricing and recent developments in oil markets." He added: "Despite his hawkish stance, Fed Chair Warsh's optimistic outlook on the economy may be music to many ears."
Tokyo, Seoul, Singapore, Taipei, Wellington and Jakarta all rose in early trade, while Hong Kong and Shanghai slipped.
Tai Hui of JP Morgan Asset Management warned: "We think the chance of U.S. policy rates returning to above five percent is still limited. Nonetheless, a catalyst to extend the equity bull market (lower interest rates) is looking unlikely in the foreseeable future."
The decision angered Trump, who called Warsh a "good man" with "a hostile board." "They're raising the rates to make Trump do as bad as they can possibly do ... So they're raising that only for political reasons, and that's a raise against Trump," he said.
Oil eases
The Middle East crisis continues to weigh heavily on sentiment, with oil prices above $100 a barrel. But investors took some comfort from reports that Saudi Arabia aims to restore about half the capacity of its East-West oil pipeline within days.
The pipeline across the kingdom was shut after drone attacks. Bloomberg, citing unnamed sources, reported that state-owned Saudi Aramco aims to restore full capacity in about six weeks.
The news sent crude prices down about 3 percent on Wednesday, and they fell further on Thursday.
The Fed's hike and Warsh's comments also pushed the dollar higher against other major currencies, and it held those gains in early trade.
Attention now turns to interest rate decisions by the Bank of England and the Bank of Japan. The Bank of Japan is also expected to raise rates as it tries to curb rising inflation and support a weak yen.
Key figures at around 0230 GMT
Tokyo - Nikkei 225: UP 0.1 percent at 63,966.87 (break)Hong Kong - Hang Seng Index: DOWN 1.0 percent at 24,475.18Shanghai - Composite: DOWN 0.5 percent at 3,874.00West Texas Intermediate: DOWN 0.3 percent at $102.11 per barrelBrent North Sea Crude: DOWN 0.2 percent at $105.66 per barrelDollar/yen: DOWN at 156.15 yen from 156.37 yen on WednesdayEuro/dollar: DOWN at $1.1461 from $1.1464Pound/dollar: DOWN at $1.3375 from $1.3377Euro/pound: DOWN at 85.68 pence from 85.69 penceNew York - Dow: DOWN 1.2 percent at 51,461.90 (close)London - FTSE 100: UP 0.3 percent at 10,688.47 (close)
AFP
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