HONG KONG, China — Asian markets rallied Thursday after Wall Street's record-breaking day as traders welcomed news that the Federal Reserve still saw three interest rate cuts this year even after recent data pointed to a bounce in inflation.
Decision-makers remained confident that prices will eventually be brought to heel after pushing borrowing costs to two-decade highs without doing too much harm to the US economy.
After a much-anticipated policy meeting, officials held rates for the fifth time in a row and released its dot plot projections that showed they saw 75 basis points of cuts before year's end, unchanged from December's outlook. Observers suggested June would likely see the first move.
They also ramped up their forecasts for economic growth.
Last year saw inflation come down dramatically from the multi-decade highs seen in 2022, heading towards the bank's two percent goal, but it nudged back up in January and February, fuelling worries of a downward revision to the Fed's rate estimates.
Speaking after the meeting, boss Jerome Powell admitted "inflation is still too high" but added that the recent data "haven't really changed the overall story, which is that of inflation moving down gradually on a sometimes bumpy road toward two percent".
The positive news was reinforced by a warning from European Central Bank chief Christine Lagarde that there was a risk in cutting too late, suggesting it could also make its first reduction in June.
"We cannot wait until we have all the relevant information," she said.
All three main indexes on Wall Street surged to record highs, led by tech giants including Amazon and Apple.
And the buying excitement flowed through to Asia, where Hong Kong led the way higher, followed by Tokyo, Seoul, Sydney, Shanghai, Singapore, Taipei, Wellington, Manila and Jakarta.
"The absence of any particularly hawkish news provided a green light for the market to continue its upward trajectory," said Stephen Innes at SPI Asset Management.
"And why not, as a sturdy economy plus rate cuts is the best possible scenario, and it’s fair to suggest that it's now the consensus."
IG Markets analyst Hebe Chen added that traders were relieved to get "a clearer view of the near-term picture".
The prospect of US rates coming down saw the dollar fall back against its major peers, providing some relief to the yen, which had come under pressure after the Bank of Japan said Tuesday that its first rate hike in 17 years would not be the start of a series.
Key figures around 0230 GMT
Tokyo - Nikkei 225: UP 1.7 percent at 40,670.52 (break)
Hong Kong - Hang Seng Index: UP 2.5 percent at 16,952.94
Shanghai - Composite: UP 0.3 percent at 3,088.47
Dollar/yen: DOWN at 150.45 yen from 151.36 yen on Wednesday
Euro/dollar: UP at $1.0936 from $1.0923
Pound/dollar: UP at $1.2795 from $1.2782
Euro/pound: UP at 85.47 pence from 85.44 pence
West Texas Intermediate: UP 0.6 percent at $81.74 per barrel
Brent North Sea Crude: UP 0.6 percent at $86.49 per barrel
New York - Dow: UP 1.0 percent at 39,512.13 (close)
London - FTSE 100: FLAT at 7,737.38 (close)