Investors fear that higher rates in the United States will push capital out of emerging markets in Asia and cause the region’s currency to depreciate, causing financial turmoil.
Tech stocks fell sharply. An index in Hong Kong that tracks China’s biggest tech companies fell more than 4%. Alibaba lost more than 6%.
“I would say the committee is of the view that the federal funds rate should be increased at the March meeting, assuming the conditions are appropriate to do so,” he told reporters on Wednesday.
In a statement, the Fed said it would be “shortly appropriate to raise the target range for the federal funds rate,” with inflation well above 2% and a strong labor market.
Expectations of a US rate hike pushed a key dollar index to the highest level in nearly a month. The U.S. dollar currency index — which measures the strength of the greenback against a basket of currencies used by U.S. trading partners — was up 0.7% to trade at 96.65.
Outside of external growth shocks, “there isn’t much that would stop the Fed from raising interest rates at its March meeting,” wrote Kerry Craig, global market strategist for JP Morgan Asset. Management, in a note Thursday. He added that a tightening of federal policy “adding to market volatility over the course of the year.”
The International Monetary Fund recently warned that emerging and developing economies should brace for possible financial market turmoil as the United States and Europe raise policy rates.