Asia-Pacific markets mixed as recession fears grow, China vows to stabilize economy

San Francisco Federal Reserve President Mary Daly said Friday she sees the recent inflation news as welcome, but it’s not enough to change her view on where policy needs to go.

The October and November readings for the consumer price index amounted to “good news,” but “we don’t see anything right now but hope in the inflation data, and I get confidence in evidence, not hope. So I’m hopeful we’re on a good truck, but I won’t be confident until I see repeated evidence that inflation is truly back on a path for 2% in the coming years,” Daly said in a conversation hosted by the American Enterprise Institute.

“We are far away from our price stability goal,” she added.

Earlier this week, the Fed raised its benchmark borrowing rate by half a percentage point, the seventh hike of the year that took the funds level to a target range of 4.25%-5%.

Daly, a nonvoter this year on the rate-setting Federal Open Market Committee, said her own expectations of where rates are headed is probably higher than current market pricing. Daly votes again in 2024.

—Jeff Cox

Plans from the Federal Reserve to continue hiking rates into next year heighten the odds of a very difficult downturn ahead, according to Jeremy Siegel, professor of finance at the University of Pennsylvania’s Wharton School of Business.

“I think the Fed is making a terrible mistake,” he told CNBC’s “Squawk on the Street” on Friday. “Their plan, their dot plot, is way too tight. Inflation is basically over, despite the way Chairman [Jerome] Powell characterizes it.”

According to Siegel, the central bank should refrain from hiking further, or keeping rates elevated next year.

“Talk of going higher and staying high in 2023, I think would guarantee a very steep recession,” he said.

— Samantha Subin

UBS upgraded its outlook for China’s 2023 gross domestic product to 4.9%, versus 4.5% previously, according to its chief China economist Wang Tao, citing an earlier and faster reopening in the nation.

Wang said the firm expects a weaker fourth-quarter GDP for 2022, downgrading its full-year forecast to 2.7% from 3.1%, pointing out November’s weakened growth with a recent surge in Covid cases.

The firm added that the Central Economic Work Conference will likely prioritize stabilizing growth as well as supportive macro policies for the upcoming year.

“We expect fiscal policy to stay proactive with small increase of headline deficit and new special LG [local government] bonds, monetary and credit policy to keep supportive with continued ample liquidity but unlikely any additional policy rate cut,” Wang said in the note.

— Jihye Lee