Hang Seng Falls 1.5% to 23,950 for Third Day as Hawkish Fed Lifts Rate Fears

Q: With a new Fed chair who favors lower rates, could the US soon reverse its aggressive rate hike path?

No. Even with Kevin Warsh seen as more open to lower rates over time, the Federal Reserve is unlikely to quickly reverse course into rate cuts. The immediate signal from the Fed is the opposite. At its June meeting, it kept rates unchanged at 3.5 per cent to 3.75 per cent, but its updated projections turned more hawkish. The median forecast for the federal funds rate at the end of 2026 rose to 3.8 per cent from 3.4 per cent in March, and nine officials now expect at least one rate increase by year-end. The Fed also removed language that had implied a possible cut this year. The main constraint is inflation. Core PCE, the Fed’s preferred underlying inflation gauge, was running around 3.3 per cent in April, still well above the 2 per cent target. Policymakers have also cited energy-price pressure, tariffs and supply disruptions linked to the Middle East conflict as reasons inflation may stay sticky. With the labour market still relatively firm, there is little urgency to ease. Warsh’s personal preference matters less than the committee’s consensus. Rate decisions are made by the FOMC, not by the chair alone, and the current committee outlook points to “higher for longer,” not a rapid pivot lower. That means markets such as Hong Kong remain exposed to US policy staying tight. Because Hong Kong’s currency system closely tracks US rates, any delayed Fed easing — or another hike — would continue to pressure local borrowing costs, equities and sentiment.

3 articles · Updated · TradingView · Jun 18

360 points were wiped off the Hang Seng, sending it down 1.5% to 23,950 and to its lowest level since July 2025 after a third straight losing session.
The selloff followed the Fed's hawkish hold, which pushed up Treasury yields and the dollar, hit Wall Street overnight and reinforced bets that US rates could still rise.
Hong Kong's monetary backdrop offered little relief: the HKMA kept its base rate at 4.0%, mirroring the Fed and leaving investors focused on the drag from prolonged high borrowing costs.
Financial, technology, retail and energy shares led the retreat, with Kingboard Laminates down 4.3%, Pop Mart 3.4% lower, Xiaomi off 2.5%, SMIC down 1.9% and Tencent losing 1.2%.