Fed's rate hike a positive for Asia

THE decision by the US Federal Reserve last week to raise interest rates has capped a strong start to the year for Asian markets and appears to have finally laid the spectre of taper tantrum to rest.

No hike would have been a surprise after recent speeches by Fed members, including importantly those of chair Janet Yellen and vice-chair Stanley Fischer, strongly signalled the Fed would raise rates in March.

The only noteworthy change to the text of the Fed statement was a reference to the lower rate of core personal consumption expenditure (PCE) inflation. The Fed may have been signalling that, with oil prices likely to drive headline inflation above 2 per cent in the months ahead, it would place more weight on core inflation.