SINGAPORE : Asian equities inched lower on Wednesday ahead of a crucial U.S. inflation report that will likely influence the Federal Reserve's monetary policy path, with markets wagering another hike in interest rates at the central bank's next meeting.
After Friday's jobs report showed a resilient U.S. labour market, emboldening bets of a 25 basis point hike at the Fed's next meeting in May, investor attention is firmly on the March inflation report due later in the day. Markets are now pricing in a 66 per cent chance of the Fed raising interest rates by 25 basis points in May and then pausing for the subsequent meetings, according to the CME FedWatch tool.
Minutes of its March meeting are due to be released later in the day and investors will parse through it for clues on the monetary path of the central bank as well as the impact of the banking stresses in March. Like other central banks, the Fed's hands are tied - a high inflation rate will prevent it from providing monetary stimulus in the coming months, Paolini said in a note.
The yen strengthened 0.04 per cent to 133.63 per dollar. The IMF said the Bank of Japan could help prevent abrupt policy changes later by allowing more flexibility in its bond yield curve control.