Most Asian equity markets rose with the yen on Monday after US Federal Reserve boss Jerome Powell said "the time has come" to start cutting interest rates, lining up the central bank for a move as soon as next month. The comments provided investors with an extra boost and helped put the August market turmoil behind them, though analysts warned to be on guard for any unexpected data that could burst the optimistic bubble. Traders were also keeping an eye on developments in the Middle East after a flare-up in hostilities between Israel and Hezbollah that fanned fears of an escalation in the region.
In a much-anticipated speech to a symposium of central bankers at Jackson Hole, Wyoming, Powell said: "The time has come for policy to adjust. "The direction of travel is clear, and the timing and pace of rate cuts will depend on incoming data, the evolving outlook and the balance of risks," he added. "My confidence has grown that inflation is on a sustainable path back to two percent," he said, referring to the central bank's target.
Equities had already been on the rise on expectations the Fed would start cutting from two-decade highs next month, with debate now mostly centred on how big the reduction would be and how many more would follow. Traders are betting on around one percentage point of reductions before the end of the year. "Importantly there was a notable absence of caveats such as 'gradual/gradualism' as used by other Fed officials," said National Australia Bank's Tapas .