Hong Kong
Equities fell Thursday after the head of the Federal Reserve gave investors a dose of reality on the outlook for the US economy, while the dollar faced fresh pressure on the prospect of interest rates being kept low for two more years.
Markets worldwide have been rallying for several weeks as lockdown measures are eased in key regions, and after governments and central banks pledged trillions of dollars in support to kickstart growth.
But after a much-anticipated meeting, the Fed laid out its view that the world’s top economy would take time to fully recover from the worst global emergency in generations, which is expected to tip the planet into recession.
In a statement it warned the crisis “poses considerable risk to the economic outlook over the medium term”, warning of a 6.5 percent contraction this year and unemployment of 9.3 percent.
It said it will keep borrowing costs at zero until the recovery from virus shutdowns is under way, with the median forecast of policy board members showing they expect the rate to stay the same through 2022 at least.
Bank boss Jerome Powell said “the path of the economy is highly uncertain” and while last month’s surprisingly good jobs report was “probably the biggest data surprise that anybody can remember”, he noted that tens of millions of people remain out of work.
While the Fed reading was broadly in line with market expectations, it gave a jolt to traders who have been piling into stocks on hopes for a quick rebound.—AFP