HONG KONG: Asian markets were mixed Thursday as an early rally fuelled by a “dovish” Federal Reserve interest rate hike gave way to the prospect of an extended period of tight monetary policy.

Traders tracked a strong performance on Wall Street at the open as the US central bank move signalled it is intent on fighting runaway prices, while its boss Jerome Powell said such big moves would not be commonplace.

The 0.75 percentage point increase — the biggest in nearly 28 years — had been expected after data Friday showed inflation at its highest since 1981, as the Ukraine war supply chain snarls sent energy and food costs spiralling.

Powell said it was “essential” to lower inflation, and policymakers “have both the tools we need and the resolve it will take to restore price stability on behalf of American families”.

He stressed that the goal is to achieve that without derailing the US economy but acknowledged there was always a risk of going too far.

In his post-meeting news conference, he told reporters the move was “an unusually large one” but he did not expect “moves of this size to be common”.

But “from the perspective of today, either a 50-basis-point or a 75-basis-point increase seems most likely at our next meeting”.

While the lift was bigger than the 50 basis points flagged before Friday’s figures, it was welcomed as a sign the Fed was on the case and helped push down Treasury yields — a key guide to future rate expectations.

The 75 basis points hike “is a solid showing that will, all else being equal, serve to improve Fed credibility and leave monetary policy slightly less behind the inflationary curve”, said BMO Capital Markets strategists Benjamin Jeffery and Ian Lyngen.