Asia stocks hesitate as Fed decision looms

Published on NewsOK Modified: September 18, 2013 at 12:07 am •  Published: September 18, 2013
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BANGKOK (AP) — Asian stock markets struggled to find their footing Wednesday as traders hesitated to make bold moves before the Federal Reserve winds up a crucial policy meeting later in the day.

The Fed is widely expected to announce a reduction in its massive bond-buying program, launched after the 2008 financial crisis to boost the flailing U.S. economy.

Stock markets are hoping for a small reduction because the bond-buying has kept interest rates super-low, making it cheaper to borrow money. The low bond yields and flood of money led investors to plow into stock markets, fueling rallies across the globe.

But U.S. central bank officials have increasingly voiced a desire to scale back the program in light of data showing a slow but steady improvement in the U.S. economy. Fed chairman Ben Bernanke put markets on notice in May that "tapering" was likely this year. Bets are for the Fed to announce a $10 billion reduction in monthly bond purchases.

Francis Lun, chief economist at GE Oriental Financial Group in Hong Kong, said he thinks the market will not react with shock if the Fed announces the phasing out of its stimulus program

"I think the market has already digested the news. We got the news in May, so it's already been four months since Ben Bernanke's indication," Lun said.

Paul Dales of Capital Economics said in an email commentary that he also expects the Fed to emphasize that "interest rates will remain low for a long time, perhaps via the publication of its interest rate forecasts for 2016 for the first time."

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