By Gina Lee

Investing.com – Asia Pacific stocks were down on Thursday morning. U.S. equity markets also fell after the Federal Reserve announced plans to increase interest rates and reduce its balance sheet by over $1 trillion per year.

Japan’s slid 1.81% by 10:38 PM ET (2:38 AM GMT) and South Korea’s fell 1.3%.

The ASX 200 was down 0.59% in Australia. It stood at 56.2 in February 2022.

Hong Kong’s inched down 0.1%.

China’s was down 0.4% and the fell 0.69%.

On Wednesday, the and fell with tech shares leading a retreat which saw the Nasdaq 100 suffer its largest two-day loss for almost a month.

U.S. Treasuries rose, with the yield curve steepening, as investors continue to digest Wednesday’s minutes from the Fed’s latest meeting. The Fed stated in the minutes that it was considering half-point rate increases and decreasing its huge bond holdings at an maximum pace of $95 million per month, to improve financial conditions.

The central bank’s plan to trim its near $9 trillion balance sheet could pose risks to economic growth and introduce further volatility into the market. Investors are concerned about the possibility of a recession.

“This job of orchestrating a soft landing is going to be difficult,” Wells Fargo (NYSE.) Investment Institute chief of global asset allocation strategy Tracie Million spoke to Reuters.

“We’ve only seen quantitative tightening once before and it was to a lesser degree than it will be this time, and it ended shortly after it started.”

At separate events, a number of Fed policymakers will address the audience, including Raphael Bostic from Atlanta Fed President and James Bullard from St. Louis Fed President James Bullard. Charles Evans, Chicago Fed President, will also speak later that day.

Contrary to the Fed’s hawkish stance, China again signaled its intention to loosen monetary policy as the country deals with its latest COVID-19 outbreak and a slumping property market. Officials will use monetary policy tools at an “appropriate time” and consider other measures to boost consumption, according to the readout from a State Council meeting chaired by Premier Li Keqiang on Wednesday.

It will also announce its policy decision Friday.

Meanwhile, commodity markets continue to be roiled by the impact of Russia’s invasion of Ukraine on Feb. 24. Russia was also on the brink of a technical default when foreign banks refused to pay $650 million in dollars for bonds. The country was then forced to pay in Russian rubles.