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Asian Stocks Up as Further Super-sized Interest Rate Hike Would be 'Rare'

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By Zhang Mengying

Investing.com – Asia-Pacific stocks were up on Thursday morning, boosted by the U.S. Federal Reserve Chair Jerome Powell’s comment that further super-sized interest-rate hikes is rare after the central bike delivered its biggest interest rate hike since 1994.

Japan’s Nikkei 225 gained 1.58% by 10:48 PM ET (2:48 AM GMT).

South Korea’s KOSPI jumped 1.45%.

In Australia, the ASX 200 rose 0.54%.

Hong Kong’s Hang Seng Index edged down 0.17%.

China’s Shanghai Composite was up 0.28% while the Shenzhen Component was up 0.47%.

The Fed raised interest rates by 75 basis points Wednesday to cool inflation after the U.S. consumer price index rose 8.6% year on year in May. The central bank is expected to deliver another big hike in July, but Jerome Powell said, “today’s 75 basis-point increase is an unusually large one and I do not expect moves of this size to be common.”

The Fed also said it will shrink its balance sheet by $47.5 billion a month, which will start from June 1 and step up to $95 billion in September.

“75 basis points is a solid showing that will, all else being equal, serve to improve Fed credibility and leave monetary policy slightly less behind the inflationary curve,” BMO Capital Markets strategists Benjamin Jeffery and Ian Lyngen said in a note.

“The response in risk assets will ultimately define the extent to which the Fed will be able to normalize monetary policy.”

Investors are worried about the slower economic growth brought by the tightening policies. U.S. Treasury yields surged in one of the biggest selloffs in decades and global equities entered a bear market.

“The volatility in bond markets is definitely not over,” Credit Suisse Private Bank director and portfolio manager Jasmin Argyrou told Bloomberg.

“The likelihood is that policy rates in the US may need to go to a more restrictive stance than even the market is pricing in.”

Investors now await policy decisions from the Bank of England (BOE), which are due later in the day. The Bank of Japan will also hand down its policy decisions on Friday.

On the data front, U.S. housing starts, and initial jobless claims are due later in the day.

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