Investors worry higher US rates could cause capital to leave Asia’s emerging markets and spur the depreciation of currency in the region, causing financial turbulence.
Tech shares fell heavily. An index in Hong Kong tracking the largest Chinese technology companies sank more than 4%. Alibaba was down more than 6%.
“I would say the committee is of a mind to raise the federal funds rate at the March meeting, assuming that conditions are appropriate for doing so,” he told reporters on Wednesday.
In a statement, the Fed said that it would “soon be appropriate to raise the target range for the federal funds rate,” with inflation well above 2% and a strong labor market.
Expectations for higher US rates pushed a key dollar index to the highest level in nearly a month. The US Dollar Currency Index — which measures the greenback’s strength against a basket of currencies used by US trade partners — is up 0.7% to trade at 96.65.
Outside of external growth shocks, “there is little that would prevent the Fed from raising interest rates at its March meeting,” wrote Kerry Craig, global market strategist for JP Morgan Asset Management, in a note on Thursday. He added that a tightening fed policy would likely “add to market volatility over the course of the year.”
The International Monetary Fund warned recently that emerging market and developing economies should prepare for possible turbulence in financial markets as the United States and Europe lift policy rates.