Stocks in Asia fell after the head of the US central bank said he would continue to raise interest rates to cope with soaring prices.
Jerome Powell warned that the Federal Reserve’s policies will cause “some pain for households and businesses.”
Higher interest rates make borrowing more expensive for individuals and businesses, which could slow economic growth as well as inflation.
Japan’s Nikkei 225 index was down 2.8% in Monday morning trading in Tokyo.
Elsewhere in the Asia-Pacific region, the Kospi in South Korea and the ASX 200 in Australia both fell more than 2%, while the Hang Seng in Hong Kong fell 0.8%.
It came after major New York stock indexes each fell more than 3% on Friday following Mr Powell’s remarks.
In a much-anticipated speech at a conference in Jackson Hole, Wyoming, Powell said the Federal Reserve would likely continue to raise interest rates in the coming months and could keep them high “for some time.” time”.
He said that while the hikes would come at a cost to US households and businesses, “a failure to restore price stability would result in far greater pain.”
Inflation in the world’s largest economy by gross domestic product (GDP) is at its highest level in four decades.
“Fed Chairman Powell has opted for the jugular, conveying (a) relentless assault on inflation,” Vishnu Varathan, head of economics and strategy at Mizuho Bank, said in a note. .
“The justification for this relentlessly warmongering posture was as clear as it was unequivocal,” he added.
Investors are also worried that the Chinese economy could slow down, Dan Wang, chief economist at Hang Seng Bank China, told the BBC.
“The economic outlook has deteriorated in China due to prolonged Covid lockdown, meaning further policy rate cuts must take place. Domestic demand is too weak without further rate cuts in China,” she said.
China’s central bank cut lending rates earlier this month after economic growth slowed sharply in the second quarter of this year.
Power shortages in Sichuan province have also hit major car and smartphone makers in China.
Over the weekend, official data showed that profits for Chinese industrial companies fell 1.1% from January to July, from a year earlier.
A crisis in the country’s property market is also proving to be a major challenge to the government’s efforts to keep the economy growing.