BUSINESS: Asian stocks fell on fears of US interest rates

Asian stocks plunged as the US cen­tral bank gov­er­nor said he would con­tin­ue to raise inter­est rates to com­bat ris­ing inflation.

Jerome Pow­ell has warned that Fed pol­i­cy “would cause some pain for house­holds and businesses.”

Ris­ing inter­est rates could make bor­row­ing more expen­sive for indi­vid­u­als and busi­ness­es, and con­strain eco­nom­ic growth and inflation.

Japan’s Nikkei Stock Aver­age fell 2.7%.

Else­where in Asia Pacif­ic, South Kore­a’s Kospi and Aus­trali­a’s ASX200 fell about 2%, while Hong Kong’s Hang Seng fell 0.8%.

That comes after the major New York stock index­es fell more than 3% each on Fri­day fol­low­ing Pow­ell’s remarks.

Pow­ell said in a much-antic­i­pat­ed speech at a con­fer­ence in Jack­son Hole, Wyoming, that the Fed could prob­a­bly keep rais­ing inter­est rates in the com­ing months and keep inter­est rates high “for a while.”

He said the hike would take a toll on U.S. house­holds and busi­ness­es, but “fail­ure to restore price sta­bil­i­ty will hurt more.”

In Japan, the world’s largest econ­o­my by gross domes­tic prod­uct (GDP), infla­tion is at its high­est lev­el in 40 years.

“Chair­man Pow­ell broad­cast a relent­less attack on infla­tion and aimed at the carotid artery,” Mizuho Bank chief econ­o­mist and strate­gist Vish­nu Varathan said in a memo.

He also said that “the ratio­nale for such a relent­less­ly aggres­sive stance was clear.”

Investors are also con­cerned about a slow­down in the Chi­nese econ­o­my, said Dan Wang, chief econ­o­mist at Hang Seng Bank China.

Chi­na’s eco­nom­ic out­look has dete­ri­o­rat­ed due to the long-term reign of “Covid”, and fur­ther rate cuts are need­ed. With­out fur­ther rate cuts from Chi­na, domes­tic demand is too weak.”

Chi­na’s cen­tral bank cut inter­est rates ear­li­er this month after eco­nom­ic growth slowed sharply in the sec­ond quar­ter of this year.

Pow­er short­ages in Sichuan have also hit Chi­na’s major automak­ers and smart­phone makers.

Offi­cial data released over the week­end said prof­its of Chi­nese indus­tri­al firms fell 1.1% from Jan­u­ary to July com­pared to the same peri­od last year.

The real estate mar­ket cri­sis also pos­es a major chal­lenge to the gov­ern­men­t’s efforts to sus­tain eco­nom­ic growth.