Asia-Pacific markets mostly rose on Wednesday, following the lead of Wall Street after the U.S. Federal Reserve held rates steady and signaled rate cuts in 2024 and beyond. Investors also awaited the decisions of the Bank of Japan and the People’s Bank of China, as well as the minutes of the Reserve Bank of Australia.
The Fed kept its benchmark policy rate unchanged at 5.25%-5.5% for the third consecutive time, as expected by economists. However, the central bank also indicated that it could start reducing rates in 2024, assuming a quarter-percentage point reduction each time. The Fed projected three rate cuts in 2024 and four in 2025, down from its previous forecasts of four and five, respectively.
The Fed also lowered its inflation expectations for the next two years, citing the transitory nature of the recent price pressures. The Fed’s preferred inflation measure, the core personal consumption expenditures price index, is now expected to average 2.4% in 2024 and 2.2% in 2025, down from 2.6% and 2.3% in its previous projections.

The Fed’s dovish stance boosted the U.S. stock market, with the Dow Jones Industrial Average closing above 37,000 for the first time, and the S&P 500 and the Nasdaq Composite also hitting record highs. The U.S. dollar weakened against most major currencies, while the 10-year Treasury yield fell to 2.82%.
Asia markets follow suit
The positive sentiment spilled over to Asia, with most markets posting gains on Wednesday. Australia’s S&P/ASX 200 rose 1.39%, reaching its highest level since Aug.10. The Australian dollar also appreciated against the U.S. dollar, as traders awaited the release of the RBA’s minutes for its Sept. 5 policy meeting, where it kept its cash rate at 4.1%.
Japan’s Nikkei 225 edged up 0.12%, as investors looked ahead to the BOJ’s monetary policy meeting on Friday. The BOJ is widely expected to maintain its ultra-easy policy stance, but some analysts speculate that it could signal a future tapering of its massive asset purchases, given the rising costs and diminishing returns of its stimulus program.
China’s Shanghai Composite gained 0.51%, snapping a three-day losing streak, while the CSI 300 advanced 0.67%. The Chinese yuan also strengthened against the U.S. dollar, as the PBOC set the midpoint of its daily trading band at 6.4336, the highest level since June 2018. The PBOC will announce its loan prime rate decisions on Friday, which are expected to remain unchanged.
Hong Kong’s Hang Seng index was the outlier, falling 0.86%, as the city’s leader Carrie Lam announced a new round of social distancing measures to contain a surge in Covid-19 cases. The measures include banning dine-in services after 6 p.m., limiting public gatherings to two people, and closing entertainment venues such as cinemas and karaoke bars.
Outlook and risks
The outlook for the Asia-Pacific region remains mixed, as the countries face different challenges and opportunities amid the pandemic. While some economies, such as China and Australia, have shown resilience and recovery, others, such as India and Indonesia, have suffered from severe outbreaks and lockdowns.
The main risks for the region include the uncertainty over the Covid-19 situation and the pace of vaccination, the potential spillover effects of the Fed’s policy normalization and the U.S.-China trade tensions, and the geopolitical tensions in the South China Sea and the Korean Peninsula.