While data in recent months has shown inflation is coming down, the employment figures showed the economy remained robust, leading several top Federal Reserve officials to warn much more work was needed to get prices under control.
Having spent January optimistic that the days of central bank tightening would soon come to an end, traders have been brought back down to earth this month as they contemplate borrowing costs going higher and staying there longer than expected.
Richmond Fed president Thomas Barkin added his voice to colleagues this week in warning that the bank had to "stay the course" in lifting rates if it wanted to bring inflation down to its two percent target.
However, with the cost of borrowing going higher still -- and some warning it could go to a two-decade-high six percent -- fears are growing that the world's top economy will tip into recession.
"Inflation most likely won't get conquered if the economy doesn't break," said OANDA's Edward Moya.
"Disinflation trends remain in place but it will be hard for them to continue with a strong labour market and as the economy keeps on growing. We've seen commodities and goods price declines, but core services remain tricky."
He added that the Fed would continue hiking until personal consumption expenditure -- the bank's preferred inflation gauge -- was trending sharply lower. "And that might not happen until the summer," he said.
After Wall Street's retreat, most of Asia was in the red.
Hong Kong led the losses, shedding 1.8 percent, as tech firms suffered more heavy selling pressure, while there were also losses in Shanghai, Sydney, Seoul, Singapore, Taipei, Mumbai, Bangkok and Jakarta, though a weaker yen helped Tokyo higher.
Analysts said next week's consumer price index release will be a key data point, which could play a big role in the Fed's plans for future rate hikes.
"Whether or not the Fed has tightened financial conditions sufficiently to bring inflation down to target over time is going to be the most significant debate in the market agenda through the first half of the year," said SPI Asset Management's Stephen Innes.
He added that "the fear is now that we could still be talking rate hikes in the third quarter".
Singapore maintains 2023 GDP growth forecast, spurred by China reopening
Singapore (AFP) Feb 13, 2023 -
Singapore said Monday it will stick to its economic growth forecast for 2023 despite the slowdown last year, encouraged by China's rapid reopening after years of crushing zero-Covid policies.
The city-state's economic performance is often seen as a useful barometer of the global environment because of its reliance on trade with the rest of the world.
Singapore's Ministry of Trade and Industry said in a statement that it would maintain its growth forecast of 0.5 to 2.5 percent.
"Growth in China is projected to pick up in tandem with the faster-than-expected easing of its Covid-19 restrictions," the Ministry of Trade and Industry (MTI) said in a statement.
"This has led to improvements in the growth outlook of regional economies."
It also pointed to the easing of global commodity prices, but cautioned that they "remain elevated with the ongoing Russia-Ukraine war".
Singapore's economy expanded 3.6 percent in 2022, slowing from the 8.9 percent growth in 2021, the MTI said.
Its government lifted the bulk of its Covid restrictions last year. On Monday, it also ended the requirement to wear face masks on public transport.
"The economy still remains resilient despite the slightly softer GDP side as the job market is doing strong," said Song Seng Wun, a regional economist with CIMB Private Banking.
Despite the reopening of China -- the world's second-biggest economy -- and other positive global trends, the MTI warned that uncertainties remain.
It pointed to the rate hike campaigns by central banks to rein in inflation, as well as the impact of property sector woes and weakening global demand on China's recovery.
"Further escalations in the war in Ukraine and geopolitical tensions among major global powers could worsen supply disruptions, dampen consumer and business confidence, as well as weigh on global trade," it added.
Chief Economist at OCBC Bank Selena Ling said: "China's re-opening bodes well for regional growth momentum if Chinese consumer demand for goods and services picks up in coming months, however, this may not suffice to offset the slowing demand story in other major economies like the US, Eurozone and the UK."
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