Asian markets surge on rising hopes for a US Federal Reserve interest rate cut.
In a significant development, Japan’s primary stock index has reached a new peak for the second consecutive day, fueled by optimistic expectations regarding a potential interest rate cut in the United States, alongside easing trade tensions between Washington and Beijing.
On Wednesday, the Nikkei 225 climbed beyond 43,421 points, following favorable US inflation data that strengthened the argument for a rate reduction by the Federal Reserve during its upcoming committee meeting in September.
This landmark achievement follows Tuesday’s breakthrough, as the Nikkei surpassed the 42,999-point threshold for the first time ever.
Meanwhile, in the United States, both the S&P 500 and the tech-centric Nasdaq Composite hit unprecedented highs on Tuesday, experiencing increases of 1.13 percent and 1.39 percent respectively. Investors responded positively to the inflation report, which indicated consumer prices rose by a lower-than-expected 2.7 percent in July.
The encouraging inflation figures have rekindled investor optimism, particularly following US President Donald Trump’s announcement earlier this week of a 90-day delay on imposing punitive tariffs on Chinese imports.
Other Asian indices also witnessed substantial gains on Wednesday, with Hong Kong’s Hang Seng Index increasing alongside South Korea’s KOSPI, which rose by approximately 2.40 percent and 1 percent, respectively, during the afternoon session.
The Federal Reserve and its chair, Jerome Powell, have faced mounting pressure from President Trump over the past months to reduce interest rates.
A decrease in the benchmark rate could stimulate the US economy, the global growth engine, by reducing borrowing costs for households and businesses alike.
However, the Fed has been hesitant to enact a rate cut, citing concerns that it could further exacerbate inflation, especially as Trump’s extensive tariffs are already contributing to price pressures.
“Jerome ‘Too Late’ Powell needs to cut rates NOW,” Trump commented on Truth Social, asserting that the Fed chair’s hesitance has inflicted “incalculable” damage to the economy.
On Tuesday, the CME Group’s FedWatch tool showed an increased likelihood of a rate cut in September, with probabilities rising to 96.4 percent from 85.9 percent the previous day.