HONG KONG: Asian markets struggled Thursday to recover from the previous day's battering, while oil extended losses, after Federal Reserve boss Jerome Powell admitted the economy could tip into recession as the bank hikes interest rates to fight runaway inflation.
Soaring prices and central banks' battle to rein them in have sent a chill through global trading floors this year, while investors are also having to deal with the uncertainty wrought by the Ukraine war and patchy pandemic recovery, reports AFP.
And on Wednesday the head of the most powerful central bank in the world told lawmakers that it was "certainly a possibility".
While saying the economy was strong enough for rates to rise, he added that "frankly, the events of the last few months around the world have made it more difficult for us to achieve what we want, which is two percent inflation and still a strong labour market."
He also warned: "Inflation has obviously surprised to the upside over the past year, and further surprises could be in store".
The Fed this month hiked rates by 75 basis points and is expected to do the same in July, with some observers predicting two more such moves after that.
After a day of swings, Wall Street ended in negative territory, though off big early lows.
Hong Kong, Sydney, Singapore and Wellington were slightly higher but Tokyo, Shanghai, Seoul, Taipei, Manila and Jakarta fell.
"Having listened to Powell's lengthy Senate testimony... it is clear that inflation is the domestic issue at the top of the political agenda," said SPI Asset Management's Stephen Innes.
"Powell consistently bobbed and weaved his way through commenting on anything of fiscal nature but was focused on deploying the tools within the Fed's power to address their dual mandate" of reining in inflation and keeping unemployment in check.
"So we should still position for more rate hike fallout to occur."
Powell's comments came as other top economists added to the recession talk, with former New York Fed President Bill Dudley saying it was "inevitable within the next 12 to 18 months".
And Deutsche Bank CEO Christian Sewing said there was a 50 percent chance of a contraction next year.
Elon Musk, JP Morgan boss Jamie Dimon and Nouriel Roubini are among several others to have made similar forecasts.
"We are still in an era where uncertainty is elevated and is expected to remain so for quite a while," said JoAnne Feeney, of Advisors Capital Management, on Bloomberg Television.