The US Federal Reserve’s release of hawkish minutes from its last policy meeting sent interest rate sensitive stocks plunging on Wall Street and the ASX, as the prospect of interest rates rising sooner than expected pushed local shares to their biggest drop in 16 months.
“Jerome Powell’s second term as Fed chairman will be defined by whether the Fed achieves a soft landing or a hard landing in terms of inflation and monetary tightening,” summarised Matthew Peter, chief economist at QIC.The minutes, published early on Thursday AEDT, showed Fed officials uniformly concerned about the pace of price increases that are expected to persist “well into” 2022. US consumer prices rose 6.8 per cent in the year through November, the biggest increase in 40 years.
Yields on Australian 10-year government bonds shot up to 1.84 per cent in sympathy, from a session low of 1.71 per cent.The Fed’s decisively hawkish turn could have an undesirable impact on the world's biggest economy.