Published June 19, 2025
Asian stocks fell Thursday after the Federal Reserve warned Donald Trump’s trade war would likely reignite US inflation and dampen economic growth.
At the same time, oil prices edged down as investors awaited developments in the Israel-Iran conflict.
While geopolitical tensions are the key focus for markets, traders were also watching the US central bank’s latest meeting Wednesday as officials gathered to discuss monetary policy in light of the president’s tariff blitz.
The Fed kept borrowing rates on hold for a fourth consecutive meeting, as expected, and said in a statement that “uncertainty about the economic outlook has diminished but remains elevated”.
It later cut its economic growth forecast for this year and raised inflation and unemployment expectations, in its first updated projections since Trump unveiled his levies on most trading partners at the start of April.
Boss Jerome Powell called the economy “still solid” but added that “increases in tariffs this year are likely to push up prices and weigh on economic activity”.
He said the bank was “well-positioned to wait to learn more” before considering changes to rates. Still, the Fed’s so-called dot-plot chart predicted two cuts this year.
“Ultimately, the cost of the tariff has to be paid, and some of it will fall on the end consumer. We know that’s coming, and we just want to see a little bit of that before we make judgments prematurely,” he added
With Trump increasingly calling for the bank to slash rates, Powell said, “We’ll make smarter and better decisions if we just wait a couple of months.”
Hours before the decision, the president said, “We have a stupid person, frankly, at the Fed.”
Speaking at the White House, he added, “We have no inflation, we have only success, and I’d like to see interest rates go down. Maybe I should go to the Fed. Am I allowed to appoint myself?”
“The Fed’s assessment indicates that the economy is in good shape, aligning with current economic data.
“However, trade policy, fiscal policy, and unintended consequences of policies from the Trump administration are contributing to market volatility in the second half of this year,” said Tai Hui at JP Morgan Asset Management.
After a tepid day on Wall Street, Asian markets turned lower.
Hong Kong led losses, falling more than one per cent, while Tokyo, Shanghai, Sydney, Singapore, Seoul, Wellington, Taipei, Manila, and Jakarta were also in the red.
The Fed comments compounded the already weak sentiment on trading floors as Trump considers whether to join Israeli strikes against Iran.
He indicated he was still looking into such a move and that Iran had reached out seeking negotiations, saying: “I may do it, I may not do it. I mean, nobody knows what I’m going to do.”
Without providing more details, he added: “The next week is going to be very big.”
Iran’s supreme leader, Ayatollah Ali Khamenei, sounded defiant, rejecting Trump’s call for “unconditional surrender”.
Still, with no concrete signs of escalation, oil prices slowed after another volatile day on Wednesday.
Analysts said the main worry for traders was the possibility Tehran would shut a key shipping lane through which an estimated fifth of global oil supply flows.
“We don’t see it as a likely scenario at this time, but given the precarious state that the Iranian regime is in right now, I think everybody should be watching” the Strait of Hormuz, Mike Sommers, president of the American Petroleum Institute, told Bloomberg television in an interview.
Key figures at around 0230 GMT
Tokyo – Nikkei 225: DOWN 0.7 per cent at 38,597.16 (break)
Hong Kong – Hang Seng Index: DOWN 1.0 per cent at 23,486.26
Shanghai – Composite: DOWN 0.3 per cent at 3,377.19
Euro/dollar: DOWN at $1.1455 from $1.1485 on Wednesday
Pound/dollar: DOWN at $1.3396 from $1.3420
Dollar/yen: UP at 145.15 yen from 145.09 yen
Euro/pound: DOWN at 85.51 pence from 85.55 pence
West Texas Intermediate: DOWN 0.4 per cent at $74.86 per barrel
Brent North Sea Crude: DOWN 0.4 per cent at $76.40 per barrel
New York – Dow: DOWN 0.1 per cent at 42,171.66 (close)
London – FTSE 100: UP 0.1 at 8,843.47 (close)
AFP
