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Federal Reserve hikes interest rates seven years after financial crisis – as it happened Federal Reserve hikes interest rates seven years after financial crisis – as it happened
(7 days later)
9.02pm GMT21:029.02pm GMT21:02
The market likes the hikeThe market likes the hike
The Dow reacted favorably to the news – since 2 p.m., when the rate increase was announced, the industrial average has steadily risen and closed up 1.28%. The S&P 500 has followed an almost identical trajectory and closed up 1.45%. Neither Bernie Sanders nor the Guardian editorial board are sold on the rate change; we will doubtless be sussing out the effects of the hike for years go come. The blog is wrapping up for the afternoon but our full story on the meeting, the hike and the reaction from many different sectors is here.The Dow reacted favorably to the news – since 2 p.m., when the rate increase was announced, the industrial average has steadily risen and closed up 1.28%. The S&P 500 has followed an almost identical trajectory and closed up 1.45%. Neither Bernie Sanders nor the Guardian editorial board are sold on the rate change; we will doubtless be sussing out the effects of the hike for years go come. The blog is wrapping up for the afternoon but our full story on the meeting, the hike and the reaction from many different sectors is here.
Keep coming back to the business section as the story unfolds.Keep coming back to the business section as the story unfolds.
Updated at 9.04pm GMTUpdated at 9.04pm GMT
8.48pm GMT20:488.48pm GMT20:48
Dean Turner, an economist at UBS, said he believed the market impact would be largely positive, since what financial systems like least is equivocation and the last several months of will-they-or-won’t-they has made investment difficult.Dean Turner, an economist at UBS, said he believed the market impact would be largely positive, since what financial systems like least is equivocation and the last several months of will-they-or-won’t-they has made investment difficult.
“Markets should welcome the decision to hike US rates as it puts months of uncertainty to one side,” he wrote. Turner, who also said UBS favored yield European bonds, said he thought further rate increases would not hurt economic growth domestically. “We expect the pace of tightening next year to be gradual, with four more hikes in 2016. Although this is more hawkish than the markets currently expect, we believe that the US economy will continue to expand.”“Markets should welcome the decision to hike US rates as it puts months of uncertainty to one side,” he wrote. Turner, who also said UBS favored yield European bonds, said he thought further rate increases would not hurt economic growth domestically. “We expect the pace of tightening next year to be gradual, with four more hikes in 2016. Although this is more hawkish than the markets currently expect, we believe that the US economy will continue to expand.”
Turner also said the UK would likely follow suit. “The US interest rate rise is unlikely to influence the timing of the Bank of England’s decision to hike rates,” Turner said. “However, it still looks as though the BoE will be the first central bank to follow the US, though the inflation and wage outlook over the next few months suggests they have time to wait. We currently expect the BoE to raise rates in May, followed by a further hike in November.”Turner also said the UK would likely follow suit. “The US interest rate rise is unlikely to influence the timing of the Bank of England’s decision to hike rates,” Turner said. “However, it still looks as though the BoE will be the first central bank to follow the US, though the inflation and wage outlook over the next few months suggests they have time to wait. We currently expect the BoE to raise rates in May, followed by a further hike in November.”
8.44pm GMT20:448.44pm GMT20:44
Jana KasperkevicJana Kasperkevic
Jana Kasperkevic, on the ground in DC, spoke to deputy labor secretary Chris Lu about part-time unemployment.Jana Kasperkevic, on the ground in DC, spoke to deputy labor secretary Chris Lu about part-time unemployment.
There are few things that Yellen says the FED is still concerned about - one of them is the “abnormal high level of part-time employment”.There are few things that Yellen says the FED is still concerned about - one of them is the “abnormal high level of part-time employment”.
Earlier this month, the US Department of Labor announced that “the number of persons employed part time for economic reasons” - those who wanted a full time job and could not find one - “increased by 319,000 to 6.1 million in November, following declines in September and October.”Earlier this month, the US Department of Labor announced that “the number of persons employed part time for economic reasons” - those who wanted a full time job and could not find one - “increased by 319,000 to 6.1 million in November, following declines in September and October.”
In an interview with the Guardian, the US Deputy Secretary of Labor Chris Lu dismissed that jump in part-time unemployed.In an interview with the Guardian, the US Deputy Secretary of Labor Chris Lu dismissed that jump in part-time unemployed.
“We don’t focus too much on one month. This 319,000 is really significant drop from the month before. I don’t have the number of what it went down by in October, but if you look at the long-term trend, going back to 2010, it has gone down significantly,” Lu told the Guardian.“We don’t focus too much on one month. This 319,000 is really significant drop from the month before. I don’t have the number of what it went down by in October, but if you look at the long-term trend, going back to 2010, it has gone down significantly,” Lu told the Guardian.
The number of Americans employed part-time for economic reasons in October was about 5.76m. In September, that number was a little more than 6m.The number of Americans employed part-time for economic reasons in October was about 5.76m. In September, that number was a little more than 6m.
Lu is however, correct that the number has come down over the years. Just last year, in November 2014, the number of those working part-time jobs but wanting full time jobs was 6.85m. In 2012, that number was 8.1m.Lu is however, correct that the number has come down over the years. Just last year, in November 2014, the number of those working part-time jobs but wanting full time jobs was 6.85m. In 2012, that number was 8.1m.
When asked if the November jump in part-time workers was significant, Elise Gould, senior economist at the left-leaning Economic Policy Institute also said that the number was not a reason for alarm.When asked if the November jump in part-time workers was significant, Elise Gould, senior economist at the left-leaning Economic Policy Institute also said that the number was not a reason for alarm.
“Those numbers are jumpy,” she told the Guardian.“Those numbers are jumpy,” she told the Guardian.
8.38pm GMT20:388.38pm GMT20:38
After clocking in an hour and seven minutes of press conference, Yellen ends her final comments with another assertion that the Fed will watch wages closely (along with inflation, unemployment, and every other economic measure) as it decides whether to hike interest rates again.After clocking in an hour and seven minutes of press conference, Yellen ends her final comments with another assertion that the Fed will watch wages closely (along with inflation, unemployment, and every other economic measure) as it decides whether to hike interest rates again.
Yellen says in a strengthening market we should see increase in wage growth. We have a seen a pick up in average hourly earningsYellen says in a strengthening market we should see increase in wage growth. We have a seen a pick up in average hourly earnings
8.36pm GMT20:368.36pm GMT20:36
Yellen wants Americans to think of the new interest rate as a vote of confidence in the economy.Yellen wants Americans to think of the new interest rate as a vote of confidence in the economy.
Democratic candidate for president Bernie Sanders thinks she’s made a big mistake.Democratic candidate for president Bernie Sanders thinks she’s made a big mistake.
“When millions of Americans are working longer hours for lower wages, the Federal Reserve’s decision to raise interest rates is bad news for working families. At a time when real unemployment is nearly 10 percent and youth unemployment is off the charts, we need to do everything possible to create millions of good-paying jobs and raise the wages of the American people.“When millions of Americans are working longer hours for lower wages, the Federal Reserve’s decision to raise interest rates is bad news for working families. At a time when real unemployment is nearly 10 percent and youth unemployment is off the charts, we need to do everything possible to create millions of good-paying jobs and raise the wages of the American people.
“The Fed should act with the same sense of urgency to rebuild the disappearing middle class as it did to bail out Wall Street banks seven years ago.”“The Fed should act with the same sense of urgency to rebuild the disappearing middle class as it did to bail out Wall Street banks seven years ago.”
And not that the chairwoman asked, the Guardian’s editorial board has also dubbed the increase “risky and premature”, due to the unusual pace of the economy after the recession.And not that the chairwoman asked, the Guardian’s editorial board has also dubbed the increase “risky and premature”, due to the unusual pace of the economy after the recession.
Related: The Guardian view on the US interest rate rise: risky and premature | EditorialRelated: The Guardian view on the US interest rate rise: risky and premature | Editorial
8.31pm GMT20:318.31pm GMT20:31
Yellen says the Fed isn’t following a calendar for interest rates, but she says it like this: “It is not the intention of the commiIttee to follow any mechanical formula of that type.”Yellen says the Fed isn’t following a calendar for interest rates, but she says it like this: “It is not the intention of the commiIttee to follow any mechanical formula of that type.”
Things Yellen keeps repeating: - this is a small step - gradual increases - Fed will "carefully monitor" factors like inflationThings Yellen keeps repeating: - this is a small step - gradual increases - Fed will "carefully monitor" factors like inflation
“I see import prices and energy prices as holding down” inflation, she says.“I see import prices and energy prices as holding down” inflation, she says.
8.27pm GMT20:278.27pm GMT20:27
Dominic RusheDominic Rushe
We’re coming towards the end of Yellen’s press conference and so far the stock markets are loving it. The Dow Jones Industrial Average has risen pretty much constantly since she started talking. We’ve come a long way considering that any talk of a rate hike used to send investors into a panic.We’re coming towards the end of Yellen’s press conference and so far the stock markets are loving it. The Dow Jones Industrial Average has risen pretty much constantly since she started talking. We’ve come a long way considering that any talk of a rate hike used to send investors into a panic.
8.25pm GMT20:258.25pm GMT20:25
Yellen again dodges a question about what happens if inflation doesn’t do what the Fed wants it to (increase gradually on its way up to 2%).Yellen again dodges a question about what happens if inflation doesn’t do what the Fed wants it to (increase gradually on its way up to 2%).
She alludes to the stock market shocks of international markets and the continuing plummet of energy prices. “I do expect there is a bottom to that, I expect that we’ll be seeing that.”She alludes to the stock market shocks of international markets and the continuing plummet of energy prices. “I do expect there is a bottom to that, I expect that we’ll be seeing that.”
The Fed will keep an open mind about action to cope with inflation, she says, but again refuses to get into what the committee will look for as it judges the consequences of its own decisions.The Fed will keep an open mind about action to cope with inflation, she says, but again refuses to get into what the committee will look for as it judges the consequences of its own decisions.
8.22pm GMT20:228.22pm GMT20:22
Long-term loans should not move much because of the decision, Yellen tells a reporter, urging the same calm as she has for nearly an hour.Long-term loans should not move much because of the decision, Yellen tells a reporter, urging the same calm as she has for nearly an hour.
“Loans that are linked to longer term interest rates are unlikely to move very much,” she says, using “some corporate loans” as an example.“Loans that are linked to longer term interest rates are unlikely to move very much,” she says, using “some corporate loans” as an example.
“Some credit card rates and short-term borrowing rates might move up slightly,” she concedes. But “remember,” she says, “we’ve made a very small move.”“Some credit card rates and short-term borrowing rates might move up slightly,” she concedes. But “remember,” she says, “we’ve made a very small move.”
8.16pm GMT20:168.16pm GMT20:16
Jana KasperkevicJana Kasperkevic
Today’s decision follows months of debate and dissent, my colleagues Jana Kasperkevic and Rupert Neate note – but today’s decision was unanimous.Today’s decision follows months of debate and dissent, my colleagues Jana Kasperkevic and Rupert Neate note – but today’s decision was unanimous.
In his analysis of the minutes from the October’s meeting, Rupert observed: “’a couple’ members raised concerns that raising rates in December could be premature.”In his analysis of the minutes from the October’s meeting, Rupert observed: “’a couple’ members raised concerns that raising rates in December could be premature.”
The first dissent this year came during the September meeting, when Jeffrey Lacker, president of the Federal Reserve Bank of Richmond, broke ranks and voted to increase the interest rates.The first dissent this year came during the September meeting, when Jeffrey Lacker, president of the Federal Reserve Bank of Richmond, broke ranks and voted to increase the interest rates.
“US economic conditions have improved quite significantly over the last six years, all things considered. It’s time to recognize the substantial progress that has been achieved and align rates accordingly,” Lacker said at the time.“US economic conditions have improved quite significantly over the last six years, all things considered. It’s time to recognize the substantial progress that has been achieved and align rates accordingly,” Lacker said at the time.
“I supported raising the target range for the federal-funds rate by 25 basis points at this meeting. Interest rates have been near zero for over six years. Even after a quarter-point increase, interest rates would remain exceptionally low, providing ample support for economic growth. ”“I supported raising the target range for the federal-funds rate by 25 basis points at this meeting. Interest rates have been near zero for over six years. Even after a quarter-point increase, interest rates would remain exceptionally low, providing ample support for economic growth. ”
Lacker’s dissent broke a stretch of five straight unanimous votes – spanning back to January of this year.Lacker’s dissent broke a stretch of five straight unanimous votes – spanning back to January of this year.
Updated at 8.43pm GMTUpdated at 8.43pm GMT
8.12pm GMT20:128.12pm GMT20:12
Interest rates are up from de facto zero, Yellen thinks the US economy is fit, and for the first time in seven years the Federal Reserve isn’t working with record-low, pro-expansion rates.Interest rates are up from de facto zero, Yellen thinks the US economy is fit, and for the first time in seven years the Federal Reserve isn’t working with record-low, pro-expansion rates.
The key word in Fed’s statement was “gradual”. Financial markets would have been spooked had it talked about a “measured” increase in interest rates, because that would have suggested a repetition of the last cycle of US monetary tightening between 2004 and 2006, when there were 17 separate quarter-point jumps in the cost of borrowing. The drip-drip approach that eventually killed off the housing boom and prompted the sub-prime mortgage crisis.The key word in Fed’s statement was “gradual”. Financial markets would have been spooked had it talked about a “measured” increase in interest rates, because that would have suggested a repetition of the last cycle of US monetary tightening between 2004 and 2006, when there were 17 separate quarter-point jumps in the cost of borrowing. The drip-drip approach that eventually killed off the housing boom and prompted the sub-prime mortgage crisis.
Nobody expects a repeat of that, because much has changed since 2006. America’s recovery has been weak by its own standards, the percentage of Americans working has fallen, and there is no real inflationary pressure. The “new normal” for interest rates is around 2%, not the 5%-plus they reached before the great recession.Nobody expects a repeat of that, because much has changed since 2006. America’s recovery has been weak by its own standards, the percentage of Americans working has fallen, and there is no real inflationary pressure. The “new normal” for interest rates is around 2%, not the 5%-plus they reached before the great recession.
Wall Street took the decision by the US central bank to raise the cost of borrowing in its stride, and no wonder. This has been one of the best flagged interest rate decisions in history and the emollient language used by the Fed was exactly what traders had been expecting.Wall Street took the decision by the US central bank to raise the cost of borrowing in its stride, and no wonder. This has been one of the best flagged interest rate decisions in history and the emollient language used by the Fed was exactly what traders had been expecting.
Related: Federal Reserve ends Hamlet-like indecision over interest ratesRelated: Federal Reserve ends Hamlet-like indecision over interest rates
8.09pm GMT20:098.09pm GMT20:09
Manufacturing, the skewed employment participation rates, and other “pressures” do concern the fed, the chairwoman says, “but the underlying health of the US economy I consider to be quite sound.”Manufacturing, the skewed employment participation rates, and other “pressures” do concern the fed, the chairwoman says, “but the underlying health of the US economy I consider to be quite sound.”
I think it’s a myth that expansions die of old age, I do not think that they die of old age. So the fact that this has been quite a long expansion doesn’t lead me to believe that it’s days are numbered.I think it’s a myth that expansions die of old age, I do not think that they die of old age. So the fact that this has been quite a long expansion doesn’t lead me to believe that it’s days are numbered.
But the economy does get hit by shocks and there are both positive shocks and negative shocks, so there is a significant odds that the economy will suffer some shock that we don’t know about that will put it into recession.But the economy does get hit by shocks and there are both positive shocks and negative shocks, so there is a significant odds that the economy will suffer some shock that we don’t know about that will put it into recession.
So yes there is some probability that that could happen and of course we would appropriately respond but it isn’t something that is fated to happen because we’ve had a long expansion.So yes there is some probability that that could happen and of course we would appropriately respond but it isn’t something that is fated to happen because we’ve had a long expansion.
8.06pm GMT20:068.06pm GMT20:06
“Yes, we have tolerated inflation shortfalls that we thought would disappear,” she says, without answering the question exactly of what the Fed would do if inflation continues to defy their expectations.“Yes, we have tolerated inflation shortfalls that we thought would disappear,” she says, without answering the question exactly of what the Fed would do if inflation continues to defy their expectations.
She answers a similar question about contingency plans by saying the Fed is focused on medium and long-term projections.She answers a similar question about contingency plans by saying the Fed is focused on medium and long-term projections.
8.00pm GMT20:008.00pm GMT20:00
“I’m not going to give you a simple formula for what we want to see” on inflation, Yellen says, dodging a question about the Fed’s vaunted but still mysterious “medium term” plan.“I’m not going to give you a simple formula for what we want to see” on inflation, Yellen says, dodging a question about the Fed’s vaunted but still mysterious “medium term” plan.
So far the chairwoman has not described it in many terms aside from “transitory” and “gradual”.So far the chairwoman has not described it in many terms aside from “transitory” and “gradual”.
7.58pm GMT19:587.58pm GMT19:58
Yellen says the “somewhat abnormally high level of part-time employment” is one of the markers that continues to concern her, and the Fed wants to watch what happens next with unemployment and inflation before taking action.Yellen says the “somewhat abnormally high level of part-time employment” is one of the markers that continues to concern her, and the Fed wants to watch what happens next with unemployment and inflation before taking action.
She repeats that it was very important to her not to wait too long and be “forced to tighten abruptly”.She repeats that it was very important to her not to wait too long and be “forced to tighten abruptly”.
That would risk “aborting what I would like to see as a very long-running and sustainable expansion”, she says.That would risk “aborting what I would like to see as a very long-running and sustainable expansion”, she says.
“We recognize that inflation is well below our 2% goal,” she says, but the committee has a theory for how inflation should behave. “We’re reasonably close, not quite there, but reasonably close to our maximum employment objective, but we have a significant shortfall on inflation.”“We recognize that inflation is well below our 2% goal,” she says, but the committee has a theory for how inflation should behave. “We’re reasonably close, not quite there, but reasonably close to our maximum employment objective, but we have a significant shortfall on inflation.”
7.52pm GMT19:527.52pm GMT19:52
The Fed will watch and wait, Yellen says, to see what this long awaited hike affects the markets.The Fed will watch and wait, Yellen says, to see what this long awaited hike affects the markets.
I think it’s prudent to be able to watch what the impact is on financial conditions and spending in the economy, and moving in a timely fashion enables us to do this.I think it’s prudent to be able to watch what the impact is on financial conditions and spending in the economy, and moving in a timely fashion enables us to do this.
She asks the press not to make too much of this first tentative nudge toward a normal policy.She asks the press not to make too much of this first tentative nudge toward a normal policy.
She I think it’s important not to overblow the significance of this first move, it’s only 25 basis points. Monetary poilcy remainds accomodative. … We will be watching very carefully what happens in the economy.”She I think it’s important not to overblow the significance of this first move, it’s only 25 basis points. Monetary poilcy remainds accomodative. … We will be watching very carefully what happens in the economy.”
7.50pm GMT19:507.50pm GMT19:50
Yellen shows Fed forecastsYellen shows Fed forecasts
Yellen shows a slide with the committee members’ predictions – the dot plot.Yellen shows a slide with the committee members’ predictions – the dot plot.
Updated at 8.16pm GMTUpdated at 8.16pm GMT
7.48pm GMT19:487.48pm GMT19:48
Yellen lays out the committee’s forecasts, saying the Fed will respond according to the health of the economy.Yellen lays out the committee’s forecasts, saying the Fed will respond according to the health of the economy.
“A stronger growth or a more rapid increase in inflation than we currently anticipate would suggest that the neutral funds rate is rising more quickly than expected,” she says.“A stronger growth or a more rapid increase in inflation than we currently anticipate would suggest that the neutral funds rate is rising more quickly than expected,” she says.
“If the economy were to disappoint the federal funds rate would rise more slowly … The committee is confident that the normalization process will proceed smoothly.”“If the economy were to disappoint the federal funds rate would rise more slowly … The committee is confident that the normalization process will proceed smoothly.”
She says the committee is “prepared to make adjustments to our tools” if the market demands it.She says the committee is “prepared to make adjustments to our tools” if the market demands it.
7.42pm GMT19:427.42pm GMT19:42
Yellen: waiting too long would risk recessionYellen: waiting too long would risk recession
“We recognize that it takes time for monetary policy actions to affect future economic outcomes,” Yellen continues.“We recognize that it takes time for monetary policy actions to affect future economic outcomes,” Yellen continues.
Were the Fed to wait “too long, we would likely end up having to tighten policy relatively abruptly at some point to keep the economy from overheating and to keep inflation from [dramatically] overshooting our objective.”Were the Fed to wait “too long, we would likely end up having to tighten policy relatively abruptly at some point to keep the economy from overheating and to keep inflation from [dramatically] overshooting our objective.”
She doesn’t want to risk another recession, and says interest rates will likely change only very gradually.She doesn’t want to risk another recession, and says interest rates will likely change only very gradually.
Updated at 8.17pm GMTUpdated at 8.17pm GMT
7.40pm GMT19:407.40pm GMT19:40
Yellen lays out median growth projections: 2.2% for GDP growth for this year, 2.4% for next year.Yellen lays out median growth projections: 2.2% for GDP growth for this year, 2.4% for next year.
The path of the median longer-run unemployment rate is slightly lower than the Fed had previously predicted, she adds.The path of the median longer-run unemployment rate is slightly lower than the Fed had previously predicted, she adds.
They expect inflation to remain very low for the near future, and expect it to reach 2% not until 2018.They expect inflation to remain very low for the near future, and expect it to reach 2% not until 2018.
Yellen says Fed will carefully monitor "actual and expected progress" on meeting the inflation goal.Yellen says Fed will carefully monitor "actual and expected progress" on meeting the inflation goal.
7.37pm GMT19:377.37pm GMT19:37
“Developments abroad” could still threaten the stability of the US economy, Yellen says, but nowhere near what they could have done this summer. The economy is strong enough to weather their fluctuations, she says.“Developments abroad” could still threaten the stability of the US economy, Yellen says, but nowhere near what they could have done this summer. The economy is strong enough to weather their fluctuations, she says.
Yellen notes that low energy prices and the appreciation of the dollar have “weighed on inflation” and held down import prices.Yellen notes that low energy prices and the appreciation of the dollar have “weighed on inflation” and held down import prices.
But “as these transitory influences fade and as the labor market [increases] further, the committee” believes inflation will reach 2%, she says.But “as these transitory influences fade and as the labor market [increases] further, the committee” believes inflation will reach 2%, she says.
7.35pm GMT19:357.35pm GMT19:35
Yellen outlines the criteria that she believes the economy has met for making an interest rate increase feasible. Unemployment is down to 5%, she says, with some caveats.Yellen outlines the criteria that she believes the economy has met for making an interest rate increase feasible. Unemployment is down to 5%, she says, with some caveats.
“That said, some cyclical weakness likely remains. The labor force participation rate is still below estimates … and wage growth has yet to show a sustained pickup.”“That said, some cyclical weakness likely remains. The labor force participation rate is still below estimates … and wage growth has yet to show a sustained pickup.”
“US real gross domestic product is estimated to have increased at an average pace of 2.25%,” she adds.“US real gross domestic product is estimated to have increased at an average pace of 2.25%,” she adds.
“This weakness has been offset by solid expansion of domestic spending. Continued job gains and increases in real disposable income have [increased] household spending,” and car purchases are strong even as new home construction is still slow.“This weakness has been offset by solid expansion of domestic spending. Continued job gains and increases in real disposable income have [increased] household spending,” and car purchases are strong even as new home construction is still slow.
“With gradual adjustments,” she continues, “economic activity will continue to expand at a moderate pace and labor market indicators will continue to strengthen.”“With gradual adjustments,” she continues, “economic activity will continue to expand at a moderate pace and labor market indicators will continue to strengthen.”
7.32pm GMT19:327.32pm GMT19:32
Janet Yellen begins her comments:Janet Yellen begins her comments:
“This action marks the end of an extraordinary 7 year period during which the federal funds rate was held near zero to support the recovery of the economy from the worst financial crisis and recession since the Great Depression.”“This action marks the end of an extraordinary 7 year period during which the federal funds rate was held near zero to support the recovery of the economy from the worst financial crisis and recession since the Great Depression.”
She says the economy “has come a long way” though it’s not where she’d quite like it yet. She says that normalization “is likely to proceed gradually”, and “inflation continues to run below our longer run objective”.She says the economy “has come a long way” though it’s not where she’d quite like it yet. She says that normalization “is likely to proceed gradually”, and “inflation continues to run below our longer run objective”.
7.28pm GMT19:287.28pm GMT19:28
Federal Reserve chairwoman Janet Yellen will speak about the decision to nudge interest rates up in approximately two minutes.Federal Reserve chairwoman Janet Yellen will speak about the decision to nudge interest rates up in approximately two minutes.
You can watch here, or in the embedded video at the top of the blog.You can watch here, or in the embedded video at the top of the blog.
Updated at 7.29pm GMTUpdated at 7.29pm GMT
7.25pm GMT19:257.25pm GMT19:25
And the markets react with just that: a zig-zag of a reaction, followed by what’s largely a return to pre-announcement levels. The Dow is up 99 points, Treasuries are down, and the Euro’s back to where it was.And the markets react with just that: a zig-zag of a reaction, followed by what’s largely a return to pre-announcement levels. The Dow is up 99 points, Treasuries are down, and the Euro’s back to where it was.
Wall Street calm after US rate hike (so far). Dow up 100 points after unanimous decision https://t.co/w3QzygP9Hm pic.twitter.com/EqBuEEzdPLWall Street calm after US rate hike (so far). Dow up 100 points after unanimous decision https://t.co/w3QzygP9Hm pic.twitter.com/EqBuEEzdPL
Look at stocks go. https://t.co/ho0lmaPOR0 pic.twitter.com/Cv24wnr0WeLook at stocks go. https://t.co/ho0lmaPOR0 pic.twitter.com/Cv24wnr0We
Euro more or less at the pre-FOMC level as Fed just delivered what markets had expected. pic.twitter.com/X8IYk87gsEEuro more or less at the pre-FOMC level as Fed just delivered what markets had expected. pic.twitter.com/X8IYk87gsE
7.20pm GMT19:207.20pm GMT19:20
The quickest of takes from financial journalists and investors, ahead of Janet Yellen’s press conference to elaborate on the decision.The quickest of takes from financial journalists and investors, ahead of Janet Yellen’s press conference to elaborate on the decision.
If the markets do next to nothing off this, it will be EXACTLY what Yellen and the Fed wanted.If the markets do next to nothing off this, it will be EXACTLY what Yellen and the Fed wanted.
#Fed uses word "gradual" twice in statement. Let's hope Yellen tells us more about what that means in 2:30pm press conference.#Fed uses word "gradual" twice in statement. Let's hope Yellen tells us more about what that means in 2:30pm press conference.
Key in Fed statement is slow expected pace of rate rises, to lower than normal, and long-term holding QE bonds & reinvesting dividendsKey in Fed statement is slow expected pace of rate rises, to lower than normal, and long-term holding QE bonds & reinvesting dividends
Fed rate rise today is like a fine whiskey ... impressively smooth.Fed rate rise today is like a fine whiskey ... impressively smooth.
7.04pm GMT19:047.04pm GMT19:04
The full statement from the board of the Federal Reserve on the historic increase in interest rates:The full statement from the board of the Federal Reserve on the historic increase in interest rates:
Information received since the Federal Open Market Committee met in October suggests that economic activity has been expanding at a moderate pace. Household spending and business fixed investment have been increasing at solid rates in recent months, and the housing sector has improved further; however, net exports have been soft. A range of recent labor market indicators, including ongoing job gains and declining unemployment, shows further improvement and confirms that underutilization of labor resources has diminished appreciably since early this year.Information received since the Federal Open Market Committee met in October suggests that economic activity has been expanding at a moderate pace. Household spending and business fixed investment have been increasing at solid rates in recent months, and the housing sector has improved further; however, net exports have been soft. A range of recent labor market indicators, including ongoing job gains and declining unemployment, shows further improvement and confirms that underutilization of labor resources has diminished appreciably since early this year.
Inflation has continued to run below the Committee’s 2 percent longer-run objective, partly reflecting declines in energy prices and in prices of non-energy imports. Market-based measures of inflation compensation remain low; some survey-based measures of longer-term inflation expectations have edged down.Inflation has continued to run below the Committee’s 2 percent longer-run objective, partly reflecting declines in energy prices and in prices of non-energy imports. Market-based measures of inflation compensation remain low; some survey-based measures of longer-term inflation expectations have edged down.
Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee currently expects that, with gradual adjustments in the stance of monetary policy, economic activity will continue to expand at a moderate pace and labor market indicators will continue to strengthen.Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee currently expects that, with gradual adjustments in the stance of monetary policy, economic activity will continue to expand at a moderate pace and labor market indicators will continue to strengthen.
Overall, taking into account domestic and international developments, the Committee sees the risks to the outlook for both economic activity and the labor market as balanced. Inflation is expected to rise to 2 percent over the medium term as the transitory effects of declines in energy and import prices dissipate and the labor market strengthens further. The Committee continues to monitor inflation developments closely.Overall, taking into account domestic and international developments, the Committee sees the risks to the outlook for both economic activity and the labor market as balanced. Inflation is expected to rise to 2 percent over the medium term as the transitory effects of declines in energy and import prices dissipate and the labor market strengthens further. The Committee continues to monitor inflation developments closely.
The Committee judges that there has been considerable improvement in labor market conditions this year, and it is reasonably confident that inflation will rise, over the medium term, to its 2 percent objective.The Committee judges that there has been considerable improvement in labor market conditions this year, and it is reasonably confident that inflation will rise, over the medium term, to its 2 percent objective.
Given the economic outlook, and recognizing the time it takes for policy actions to affect future economic outcomes, the Committee decided to raise the target range for the federal funds rate to 1/4 to 1/2 percent. The stance of monetary policy remains accommodative after this increase, thereby supporting further improvement in labor market conditions and a return to 2 percent inflation.Given the economic outlook, and recognizing the time it takes for policy actions to affect future economic outcomes, the Committee decided to raise the target range for the federal funds rate to 1/4 to 1/2 percent. The stance of monetary policy remains accommodative after this increase, thereby supporting further improvement in labor market conditions and a return to 2 percent inflation.
In determining the timing and size of future adjustments to the target range for the federal funds rate, the Committee will assess realized and expected economic conditions relative to its objectives of maximum employment and 2 percent inflation. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments.In determining the timing and size of future adjustments to the target range for the federal funds rate, the Committee will assess realized and expected economic conditions relative to its objectives of maximum employment and 2 percent inflation. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments.
In light of the current shortfall of inflation from 2 percent, the Committee will carefully monitor actual and expected progress toward its inflation goal. The Committee expects that economic conditions will evolve in a manner that will warrant only gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run. However, the actual path of the federal funds rate will depend on the economic outlook as informed by incoming data.In light of the current shortfall of inflation from 2 percent, the Committee will carefully monitor actual and expected progress toward its inflation goal. The Committee expects that economic conditions will evolve in a manner that will warrant only gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run. However, the actual path of the federal funds rate will depend on the economic outlook as informed by incoming data.
The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction, and it anticipates doing so until normalization of the level of the federal funds rate is well under way. This policy, by keeping the Committee’s holdings of longer-term securities at sizable levels, should help maintain accommodative financial conditions.The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction, and it anticipates doing so until normalization of the level of the federal funds rate is well under way. This policy, by keeping the Committee’s holdings of longer-term securities at sizable levels, should help maintain accommodative financial conditions.
Updated at 7.13pm GMTUpdated at 7.13pm GMT
7.01pm GMT19:017.01pm GMT19:01
Fed hikes rate by 0.25%Fed hikes rate by 0.25%
Interest rates will increase by 0.25%, the Federal Reserve has announced, the first hike after seven years of record lows.Interest rates will increase by 0.25%, the Federal Reserve has announced, the first hike after seven years of record lows.
The Fed’s statement on the increase says the decision is based on the economy “expanding at a moderate pace”, with spending and investment increasing at “solid rates” and an improved housing sector.The Fed’s statement on the increase says the decision is based on the economy “expanding at a moderate pace”, with spending and investment increasing at “solid rates” and an improved housing sector.
The Committee seeks to foster maximum employment and price stability. The Committee currently expects that, with gradual adjustments in the stance of monetary policy, economic activity will continue to expand at a moderate pace and labor market indicators will continue to strengthen. …The Committee seeks to foster maximum employment and price stability. The Committee currently expects that, with gradual adjustments in the stance of monetary policy, economic activity will continue to expand at a moderate pace and labor market indicators will continue to strengthen. …
Given the economic outlook, and recognizing the time it takes for policy actions to affect future economic outcomes, the Committee decided to raise the target range for the federal funds rate to 1/4 to 1/2 percent.Given the economic outlook, and recognizing the time it takes for policy actions to affect future economic outcomes, the Committee decided to raise the target range for the federal funds rate to 1/4 to 1/2 percent.
The statement says that the Fed expects inflation to rise to 2% “over the medium term”.The statement says that the Fed expects inflation to rise to 2% “over the medium term”.
Updated at 7.13pm GMTUpdated at 7.13pm GMT
6.58pm GMT18:586.58pm GMT18:58
From inside the Fed: “Chair is in the house. I saw her” says one journalist. “She is wearing blue.”From inside the Fed: “Chair is in the house. I saw her” says one journalist. “She is wearing blue.”
To the infinity and beyond, Janet. #FedTo the infinity and beyond, Janet. #Fed
I think I'm gonna be sick.I think I'm gonna be sick.
6.53pm GMT18:536.53pm GMT18:53
What’s going to happen in seven minutes, when the Fed announces its plans for the fate of the economy?What’s going to happen in seven minutes, when the Fed announces its plans for the fate of the economy?
A hike in interest rates, most likely, but nobody knows what Janet Yellen and her cohorts quite intend. HSBC and MarketWatch have taken a stab at prognostication.A hike in interest rates, most likely, but nobody knows what Janet Yellen and her cohorts quite intend. HSBC and MarketWatch have taken a stab at prognostication.
A small hikeA small hike
A dovish hike scenario would reinforce HSBC’s view that the dollar will weaken against its G-10 rivals in 2016. HSBC was one of the first major currency dealers to sour on the greenback. Back in the spring, the team, led by chief strategist David Bloom, accurately called the dollar’s peak (at least, so far). The base case forecast calls for the euro to strengthen to $1.20 by the end of 2016.A dovish hike scenario would reinforce HSBC’s view that the dollar will weaken against its G-10 rivals in 2016. HSBC was one of the first major currency dealers to sour on the greenback. Back in the spring, the team, led by chief strategist David Bloom, accurately called the dollar’s peak (at least, so far). The base case forecast calls for the euro to strengthen to $1.20 by the end of 2016.
A big hikeA big hike
If the Fed’s statement doesn’t adhere to the cautious profile that many have anticipated, the dollar would likely benefit from a “risk off” rally, leaving the Aussie, kiwi and many emerging-market currencies vulnerable …If the Fed’s statement doesn’t adhere to the cautious profile that many have anticipated, the dollar would likely benefit from a “risk off” rally, leaving the Aussie, kiwi and many emerging-market currencies vulnerable …
“In the end, a [dollar] rally may sow the seeds of its own destruction as it would make delivery of additional rate hikes increasingly unnecessary. Short-term, however, we would not fight the [dollar] rally,” HSBC said.“In the end, a [dollar] rally may sow the seeds of its own destruction as it would make delivery of additional rate hikes increasingly unnecessary. Short-term, however, we would not fight the [dollar] rally,” HSBC said.
No hike is also possible, and it’s most uncertain how markets would respond should Yellen delay hikes yet again.No hike is also possible, and it’s most uncertain how markets would respond should Yellen delay hikes yet again.
At the Fed, my colleague Jana Kasperkevic waits with the other journalists, one of whom laments Yellen’s timing: “Chairwoman Yellen, why, why did you decide to raise the interest rates today? Today of all days, nine days before Christmas!”At the Fed, my colleague Jana Kasperkevic waits with the other journalists, one of whom laments Yellen’s timing: “Chairwoman Yellen, why, why did you decide to raise the interest rates today? Today of all days, nine days before Christmas!”
Updated at 6.53pm GMTUpdated at 6.53pm GMT
6.41pm GMT18:416.41pm GMT18:41
As the clock ticks down to the Fed’s big announcement, Janet Yellen and her fellows take over Twitter …As the clock ticks down to the Fed’s big announcement, Janet Yellen and her fellows take over Twitter …
Wow - Yellen officially bigger than #JaneAusten #FedDecision https://t.co/cMZOcMuXqi pic.twitter.com/kh65uvpTU8Wow - Yellen officially bigger than #JaneAusten #FedDecision https://t.co/cMZOcMuXqi pic.twitter.com/kh65uvpTU8
… where financial journalists proceed to pore over her horoscope.… where financial journalists proceed to pore over her horoscope.
With under 60m left until the Fed announces its decision, what do Yellen's horoscopes say? https://t.co/isXCAdjLDX pic.twitter.com/9UqX57IiJJWith under 60m left until the Fed announces its decision, what do Yellen's horoscopes say? https://t.co/isXCAdjLDX pic.twitter.com/9UqX57IiJJ
And share interactive games of Federal Reserve interest hike bingo.And share interactive games of Federal Reserve interest hike bingo.
Part of my job today: playing bingo. You should play too at 2.30pm! #WSJYellenBingo https://t.co/oI3kspZwMcPart of my job today: playing bingo. You should play too at 2.30pm! #WSJYellenBingo https://t.co/oI3kspZwMc
6.32pm GMT18:326.32pm GMT18:32
Dominic RusheDominic Rushe
Anyone wondering whether the Fed reallywill raise rates this time might want to look back at Yellen’s comments the last time they went up, long ago in June 2006, business editor Dominic Rushe writes.Anyone wondering whether the Fed reallywill raise rates this time might want to look back at Yellen’s comments the last time they went up, long ago in June 2006, business editor Dominic Rushe writes.
Back then Yellen was president of the San Francisco Fed and argued against a raise –before deciding to vote with her colleagues for an increase.Back then Yellen was president of the San Francisco Fed and argued against a raise –before deciding to vote with her colleagues for an increase.
“In general, I believe that we should do the right thing, even if it surprises markets, but in this case our public statements seem to have convinced the public that we will raise the funds rate today,” she said then.“In general, I believe that we should do the right thing, even if it surprises markets, but in this case our public statements seem to have convinced the public that we will raise the funds rate today,” she said then.
“If we didn’t follow through, there would likely be some loss of credibility for policy.”“If we didn’t follow through, there would likely be some loss of credibility for policy.”
Yellen and other Fed officials have pretty clearly signaled that a rise is coming this time If it doesn’t she may damage her credibility – and cause panic in the markets.Yellen and other Fed officials have pretty clearly signaled that a rise is coming this time If it doesn’t she may damage her credibility – and cause panic in the markets.
6.24pm GMT18:246.24pm GMT18:24
Fed watchers are responding to the (possibly) last minutes of the rock-bottom-interest-rates era with … mixed emotions.Fed watchers are responding to the (possibly) last minutes of the rock-bottom-interest-rates era with … mixed emotions.
Are any financial journalists going to announce their retirement after the hike? I feel like this would mark a good career bookend.Are any financial journalists going to announce their retirement after the hike? I feel like this would mark a good career bookend.
Drinking what could be my last cup of tea of the ultra-low-rate-era. Big moment.Drinking what could be my last cup of tea of the ultra-low-rate-era. Big moment.
One hour to go. #Fed pic.twitter.com/iuk4F5mamkOne hour to go. #Fed pic.twitter.com/iuk4F5mamk
6.18pm GMT18:186.18pm GMT18:18
My colleague Jana Kasperkevic is in Washington to hear from the chairwoman herself – she’s sent a photo from the bowels of DC.My colleague Jana Kasperkevic is in Washington to hear from the chairwoman herself – she’s sent a photo from the bowels of DC.
She says that a photographer and a sound tech are bantering about how cold the room is.She says that a photographer and a sound tech are bantering about how cold the room is.
“You sit in a meat locker where interest rates go to die,” the photographer says, pausing for effect. “Well, except today.”“You sit in a meat locker where interest rates go to die,” the photographer says, pausing for effect. “Well, except today.”
Updated at 6.25pm GMTUpdated at 6.25pm GMT
6.00pm GMT18:006.00pm GMT18:00
What to watch for from the FedWhat to watch for from the Fed
This is your 60 minute warning! We have one hour to wait until a potentially historic rate rise (or serious market volatility if the Fed surprises us all)This is your 60 minute warning! We have one hour to wait until a potentially historic rate rise (or serious market volatility if the Fed surprises us all)
Here’s a quick guide of what to watch out for when the Federal Reserve makes its decision.Here’s a quick guide of what to watch out for when the Federal Reserve makes its decision.
Does the Fed raise rates, and by how much? Borrowing costs are currently 0% to 0.25% - the market expects a 25 basis point rise, to 0.5%. But there is some chatter that the Fed could take a baby steps, and only raise the fund rate by 10 basis points.Does the Fed raise rates, and by how much? Borrowing costs are currently 0% to 0.25% - the market expects a 25 basis point rise, to 0.5%. But there is some chatter that the Fed could take a baby steps, and only raise the fund rate by 10 basis points.
Was the Fed split? The rate-setting committee contains hawks and doves. In October, Jeffrey Lacker of Richmond split and voted for a hike. This time, it’s possible that the dovish Chicago Fed President Charles Evans might refuse to support higher borrowing costs.Was the Fed split? The rate-setting committee contains hawks and doves. In October, Jeffrey Lacker of Richmond split and voted for a hike. This time, it’s possible that the dovish Chicago Fed President Charles Evans might refuse to support higher borrowing costs.
The economic forecasts. Is the Fed more upbeat about growth and employment prospects?The economic forecasts. Is the Fed more upbeat about growth and employment prospects?
The dot plot. As explained earlier, each Fed policymaker will use dots to show where they think interest rates will be between today and 2018. Barclays’ Michael Gapen predicts the plot will show four rate rises in 2016.The dot plot. As explained earlier, each Fed policymaker will use dots to show where they think interest rates will be between today and 2018. Barclays’ Michael Gapen predicts the plot will show four rate rises in 2016.
Janet Yellen’s tone. Today’s press conference is a key moment in Yellen’s career. Her guidance will be crucial in determining whether the Fed avoids spooking investors. Expect to see the word “gradual” pop up plenty of times.Janet Yellen’s tone. Today’s press conference is a key moment in Yellen’s career. Her guidance will be crucial in determining whether the Fed avoids spooking investors. Expect to see the word “gradual” pop up plenty of times.
My US colleague Alan Yuhas will guide you through the next few hours...My US colleague Alan Yuhas will guide you through the next few hours...
5.41pm GMT17:415.41pm GMT17:41
Michael Gapen, Barclays’ chief US economist, says the Federal Reserve’s goal today is to raise interest rates and avoid causing any market turmoil.Michael Gapen, Barclays’ chief US economist, says the Federal Reserve’s goal today is to raise interest rates and avoid causing any market turmoil.
Speaking on Bloomberg TV, Gapen says the Fed has a “very real and very tangible” fear of spooking investors.Speaking on Bloomberg TV, Gapen says the Fed has a “very real and very tangible” fear of spooking investors.
The real trick today is to get off zero, but avoid a taper tantrum.The real trick today is to get off zero, but avoid a taper tantrum.
(The taper tantrum occurred in June 2013, when global markets tumbled on fears that the Fed was about to slow its QE bond-buying programme)(The taper tantrum occurred in June 2013, when global markets tumbled on fears that the Fed was about to slow its QE bond-buying programme)
Updated at 5.47pm GMTUpdated at 5.47pm GMT
5.31pm GMT17:315.31pm GMT17:31
We’re into the last 90 minutes before the Fed decision hits the wires....We’re into the last 90 minutes before the Fed decision hits the wires....
5.30pm GMT17:305.30pm GMT17:30
Jack Welch: Fed should have hiked three months agoJack Welch: Fed should have hiked three months ago
Jack Welch, the legendary former boss of General Electric, believes the Fed should have bitten the bullet back in September.Jack Welch, the legendary former boss of General Electric, believes the Fed should have bitten the bullet back in September.
Speaking on CNBC today, Welch argued that rates should have been raised three months ago - before the rout in the commodity market got underway:Speaking on CNBC today, Welch argued that rates should have been raised three months ago - before the rout in the commodity market got underway:
“It would have been better to go last time actually. Conditions were better.“It would have been better to go last time actually. Conditions were better.
The economy is not any stronger. The commodities have gone further down.”The economy is not any stronger. The commodities have gone further down.”
Of course, if the Fed had hiked in September, we’d have blamed them for the recent slump in oil prices which has rattled stock markets.Of course, if the Fed had hiked in September, we’d have blamed them for the recent slump in oil prices which has rattled stock markets.
Why the Fed has no choice on rates: @jack_welch https://t.co/GiyCQxnIMB pic.twitter.com/X9VYeUDDIMWhy the Fed has no choice on rates: @jack_welch https://t.co/GiyCQxnIMB pic.twitter.com/X9VYeUDDIM
5.25pm GMT17:255.25pm GMT17:25
Janet Yellen faces the media 30 minutes after the interest rate decision hits the wires (2.30pm in Washington, or 7.30pm for UK readers)Janet Yellen faces the media 30 minutes after the interest rate decision hits the wires (2.30pm in Washington, or 7.30pm for UK readers)
That press conference will be as significant as the decision itself - as the Fed chair’s comments will be microscopically examined by investors around the globe:That press conference will be as significant as the decision itself - as the Fed chair’s comments will be microscopically examined by investors around the globe:
Yellen will be probed about the likely path of interest rates, her view of the US economy, and also her assessment of global markets. In September, the Fed cited market jitteriness over China’s slowing economy as a reason to leave rates unchanged.Yellen will be probed about the likely path of interest rates, her view of the US economy, and also her assessment of global markets. In September, the Fed cited market jitteriness over China’s slowing economy as a reason to leave rates unchanged.
5.16pm GMT17:165.16pm GMT17:16
The Financial Times has pulled together a handy guide to the Federal Reserve’s decision today:The Financial Times has pulled together a handy guide to the Federal Reserve’s decision today:
Here’s a flavour:Here’s a flavour:
What is expected?What is expected?
The 10 officials setting US monetary policy are forecast to raise the range for the Fed funds rate — the interest banks charge each other overnight to lend reserves kept at the Fed — by a quarter percentage point from 0-0.25 per cent to 0.25-0.5 per cent.The 10 officials setting US monetary policy are forecast to raise the range for the Fed funds rate — the interest banks charge each other overnight to lend reserves kept at the Fed — by a quarter percentage point from 0-0.25 per cent to 0.25-0.5 per cent.
If they do raise, how will officials explain the move?If they do raise, how will officials explain the move?
Policymakers have been at pains to stress that their actions are dependent on the state of the economy, so expect them to point to the cumulative progress it has made since emerging from recession in 2009. The most recent bulletins from the labour market (211,000 jobs created in November) and inflation (a core measure hit 2 per cent last month) may have given officials the extra confidence they needed in order to move.Policymakers have been at pains to stress that their actions are dependent on the state of the economy, so expect them to point to the cumulative progress it has made since emerging from recession in 2009. The most recent bulletins from the labour market (211,000 jobs created in November) and inflation (a core measure hit 2 per cent last month) may have given officials the extra confidence they needed in order to move.
What about the pace of rate rises?What about the pace of rate rises?
That the pace of increases is more important than the timing of the first one has arguably been the mantra of Fed officials this year. So should the rate be lifted, expect to hear more of that.That the pace of increases is more important than the timing of the first one has arguably been the mantra of Fed officials this year. So should the rate be lifted, expect to hear more of that.
More here: Fed rate decision: what to watch forMore here: Fed rate decision: what to watch for
5.00pm GMT17:005.00pm GMT17:00
Two hours to go until the Fed!Two hours to go until the Fed!
After two thousand, five hundred and fifty six days of record low interest rates, dating back to December 2008, America has just two hours to wait until the Fed (possibly) ends the era of ultra-loose monetary policy.After two thousand, five hundred and fifty six days of record low interest rates, dating back to December 2008, America has just two hours to wait until the Fed (possibly) ends the era of ultra-loose monetary policy.
Over on Wall Street, the tension is building, ahead of the announcement at 2pm local time (7pm GMT)Over on Wall Street, the tension is building, ahead of the announcement at 2pm local time (7pm GMT)
4.53pm GMT16:534.53pm GMT16:53
European stock markets have closed for the night, meaning equity traders in the City must now sit and wait for the Fed.European stock markets have closed for the night, meaning equity traders in the City must now sit and wait for the Fed.
Most markets closed higher, but there was a late and somewhat jittery selloff.Most markets closed higher, but there was a late and somewhat jittery selloff.
Tony Cross, market analyst at Trustnet Direct, says there could be dramatic moves tomorrow....Tony Cross, market analyst at Trustnet Direct, says there could be dramatic moves tomorrow....
There may well be some marked volatility tomorrow morning too, depending on the tone that Janet Yellen adopts in the press conference and it’s worth bearing in mind that this could take a couple of days to work itself through the system.There may well be some marked volatility tomorrow morning too, depending on the tone that Janet Yellen adopts in the press conference and it’s worth bearing in mind that this could take a couple of days to work itself through the system.
4.46pm GMT16:464.46pm GMT16:46
As well as the interest rate decision, the Federal Reserve will also give us a pre-Christmas treat - its latest economic forecasts.As well as the interest rate decision, the Federal Reserve will also give us a pre-Christmas treat - its latest economic forecasts.
And that means economists, analysts and journalists across the globe will be squinting at the latest “dot plot”; a chart showing where policymakers believe interest rates will be in the next few years.And that means economists, analysts and journalists across the globe will be squinting at the latest “dot plot”; a chart showing where policymakers believe interest rates will be in the next few years.
The dot plot is a crucial part of the Fed’s message, partly because the last one showed that the Fed expects rates to rise faster than the markets.The dot plot is a crucial part of the Fed’s message, partly because the last one showed that the Fed expects rates to rise faster than the markets.
Tony Crescenzi of bond-trading giant Pimco told CNBC that:Tony Crescenzi of bond-trading giant Pimco told CNBC that:
“The dots are positioned for three to four [rate rises], and the market is positioned for two to three. It may seem out of sync with the dovish hike view.”“The dots are positioned for three to four [rate rises], and the market is positioned for two to three. It may seem out of sync with the dovish hike view.”
Here’s the last dot plot, from September:Here’s the last dot plot, from September:
(Note the festive Christmas tree formation in 2018)(Note the festive Christmas tree formation in 2018)
4.34pm GMT16:344.34pm GMT16:34
US bond yields hit highest since May 2010US bond yields hit highest since May 2010
The yield, or interest rate, on US two-year government debt has hit 1%, for the first time since May 2010.The yield, or interest rate, on US two-year government debt has hit 1%, for the first time since May 2010.
That’s another sign that Wall Street is bracing for the Fed to start tightening monetary policy.That’s another sign that Wall Street is bracing for the Fed to start tightening monetary policy.
Yields (which measure the rate of return on a bond) rise when prices fall, so rising yields mean traders are selling safe-haven US Treasuries.Yields (which measure the rate of return on a bond) rise when prices fall, so rising yields mean traders are selling safe-haven US Treasuries.
Here we go... US 2-year hits 1% yield for first time in 5+ years. pic.twitter.com/RJvAmvT4EpHere we go... US 2-year hits 1% yield for first time in 5+ years. pic.twitter.com/RJvAmvT4Ep
4.30pm GMT16:304.30pm GMT16:30
Dow Jones turns negativeDow Jones turns negative
The early rally on Wall Street is petering out.The early rally on Wall Street is petering out.
The Dow Jones industrial average, which was up 100 points earlier, has just turned negative.The Dow Jones industrial average, which was up 100 points earlier, has just turned negative.
#US stocks retrace earlier gains before the #FOMC decision due at 19:00 GMT.#US stocks retrace earlier gains before the #FOMC decision due at 19:00 GMT.
That’s partly due to the oil price. US crude is down 4% today, after new supply figures showed that stocks rose by 4.8m barrels last week. Analysts had expected a drop of 1.4 million barrels, so fears of an oil glut are hitting shares.That’s partly due to the oil price. US crude is down 4% today, after new supply figures showed that stocks rose by 4.8m barrels last week. Analysts had expected a drop of 1.4 million barrels, so fears of an oil glut are hitting shares.
Updated at 4.31pm GMTUpdated at 4.31pm GMT
4.16pm GMT16:164.16pm GMT16:16
I trust this tweet is useful to any readers in emerging markets, wondering how the Fed’s decision will affect them:I trust this tweet is useful to any readers in emerging markets, wondering how the Fed’s decision will affect them:
Just to clear things up re: Fed and emerging markets. pic.twitter.com/Q21JypZmnzJust to clear things up re: Fed and emerging markets. pic.twitter.com/Q21JypZmnz
4.11pm GMT16:114.11pm GMT16:11
Joshua Mahony, market analyst at City spread-betting firm IG, also reckons shares could rally once Janet Yellen has spoken today:Joshua Mahony, market analyst at City spread-betting firm IG, also reckons shares could rally once Janet Yellen has spoken today:
The commentary surrounding today’s announcement will be hugely important as this sets out expectations for future hikes.The commentary surrounding today’s announcement will be hugely important as this sets out expectations for future hikes.
With a notorious dove at the helm, it is highly likely that Yellen will avoid needlessly spooking the markets and instead focus on the fact rates will rise at a relatively gradual and leisurely pace.With a notorious dove at the helm, it is highly likely that Yellen will avoid needlessly spooking the markets and instead focus on the fact rates will rise at a relatively gradual and leisurely pace.
3.57pm GMT15:573.57pm GMT15:57
Brian Davidson of Capital Economics has nailed his trousers to the mast, and predicted that global stock markets will applaud a rate hike today.Brian Davidson of Capital Economics has nailed his trousers to the mast, and predicted that global stock markets will applaud a rate hike today.
In a research note to clients, Davidson says:In a research note to clients, Davidson says:
We think that a 25bp rise in the federal funds rate is likely to be seen as a vote of confidence in the US and world economy, and could boost global equity markets.We think that a 25bp rise in the federal funds rate is likely to be seen as a vote of confidence in the US and world economy, and could boost global equity markets.
He also produced this graph, showing how stock markets have typically rallied after a Fed hike - although Wall Street has usually lagged behind other developed markets (such as the City of London, and Tokyo).He also produced this graph, showing how stock markets have typically rallied after a Fed hike - although Wall Street has usually lagged behind other developed markets (such as the City of London, and Tokyo).
Davidson reckons the US stock market will ‘edge higher’ in 2016, with other developed markets (DMs) doing better:Davidson reckons the US stock market will ‘edge higher’ in 2016, with other developed markets (DMs) doing better:
Not only do we expect multinationals in Japan and the euro-zone to receive a boost to their earnings via weaker currencies, but we think that there is more scope for corporate profit margins to rise in many DMs, given the stage of the business cycle in these countries.Not only do we expect multinationals in Japan and the euro-zone to receive a boost to their earnings via weaker currencies, but we think that there is more scope for corporate profit margins to rise in many DMs, given the stage of the business cycle in these countries.
3.42pm GMT15:423.42pm GMT15:42
The wisdom of crowds...The wisdom of crowds...
In a @twitter poll yesterday, we asked you "Will the Fed hike rates?" » Here are the results: 82% YES % • 18% NO pic.twitter.com/evutAQY0C0In a @twitter poll yesterday, we asked you "Will the Fed hike rates?" » Here are the results: 82% YES % • 18% NO pic.twitter.com/evutAQY0C0
It may not be scientific (there were just 89 votes!) but it highlights that the markets are expecting the Fed’s more hawkish members to carry the day.It may not be scientific (there were just 89 votes!) but it highlights that the markets are expecting the Fed’s more hawkish members to carry the day.
3.32pm GMT15:323.32pm GMT15:32
The foreign exchange markets are quiet today - but it could be the calm before the storm.The foreign exchange markets are quiet today - but it could be the calm before the storm.
The dollar is currently up against the British pound, but flat against the euro:The dollar is currently up against the British pound, but flat against the euro:
Currency markets quiet in advance of expected #FOMC hike. RO #EURUSD 1.0929 -0.01% #GBPUSD 1.5012 -0.18% #USDJPY 121.84 +0.13%Currency markets quiet in advance of expected #FOMC hike. RO #EURUSD 1.0929 -0.01% #GBPUSD 1.5012 -0.18% #USDJPY 121.84 +0.13%
3.17pm GMT15:173.17pm GMT15:17
Here’s a handy way of decoding the Fed statement in a few hour’s time:Here’s a handy way of decoding the Fed statement in a few hour’s time:
What kind of rate hike? @steveliesman's guide to reading the #Fed today pic.twitter.com/WF9iaLHzIqWhat kind of rate hike? @steveliesman's guide to reading the #Fed today pic.twitter.com/WF9iaLHzIq
3.13pm GMT15:133.13pm GMT15:13
Ian Shepherdson, chief economist at Pantheon Macroeconomics, remembers the last time the Fed started raising rates.Ian Shepherdson, chief economist at Pantheon Macroeconomics, remembers the last time the Fed started raising rates.
Last time the Fed started tightening, they promised to be "measured". That ended well. Hope they don't promise to be "gradual" today.Last time the Fed started tightening, they promised to be "measured". That ended well. Hope they don't promise to be "gradual" today.
(here’s the Fed statement from June 2004)(here’s the Fed statement from June 2004)
3.08pm GMT15:083.08pm GMT15:08
A little Fed history....A little Fed history....
Three of the last four tightening cycles have seen the Federal Reserve hike rates steadily, as this chart from Credit Suisse shows:Three of the last four tightening cycles have seen the Federal Reserve hike rates steadily, as this chart from Credit Suisse shows:
History probably won’t repeat itself this time -- Fed chair Janet Yellen is likely to emphasise that future rate hikes will be gradual.History probably won’t repeat itself this time -- Fed chair Janet Yellen is likely to emphasise that future rate hikes will be gradual.
Updated at 4.31pm GMTUpdated at 4.31pm GMT
2.57pm GMT14:572.57pm GMT14:57
Scott Wren, senior global equity strategist at Wells Fargo Investment Institute in St. Louis, has told Reuters he expects that a dovish performance from Janet Yellen today (the so-called ‘dovish hike’)Scott Wren, senior global equity strategist at Wells Fargo Investment Institute in St. Louis, has told Reuters he expects that a dovish performance from Janet Yellen today (the so-called ‘dovish hike’)
“I think the ideal outcome today is that the Fed raises rates and they give us a lot of verbiage that says we’re going to go slow.”“I think the ideal outcome today is that the Fed raises rates and they give us a lot of verbiage that says we’re going to go slow.”
“Yellen is a dove and she is going to remain a dove. She has to follow through and hammer home that they’re not going to be in a hurry and that’s what the market wants.”“Yellen is a dove and she is going to remain a dove. She has to follow through and hammer home that they’re not going to be in a hurry and that’s what the market wants.”
2.35pm GMT14:352.35pm GMT14:35
Shares rise on Wall Street ahead of the FedShares rise on Wall Street ahead of the Fed
The Wall Street opening bell is being rung, and trading is underway in New York.The Wall Street opening bell is being rung, and trading is underway in New York.
It could be a historic session - the day that the Federal Reserve begins the long process of normalising monetary policy.It could be a historic session - the day that the Federal Reserve begins the long process of normalising monetary policy.
And right now, investors are facing that prospect in good heart.And right now, investors are facing that prospect in good heart.
The Dow Jones industrial average has jumped by 0.9% in early trading, gaining 164 points to 17,689.The Dow Jones industrial average has jumped by 0.9% in early trading, gaining 164 points to 17,689.
The S&P 500 (a broader measure of the stock market) is up 0.6%, while the tech-heavy Nasdaq is up 0.9%.The S&P 500 (a broader measure of the stock market) is up 0.6%, while the tech-heavy Nasdaq is up 0.9%.
Dow up 100 as Wall Street awaits Fed decision https://t.co/vG0JmDR4pm pic.twitter.com/H8O1scvK4rDow up 100 as Wall Street awaits Fed decision https://t.co/vG0JmDR4pm pic.twitter.com/H8O1scvK4r
2.27pm GMT14:272.27pm GMT14:27
Here’s the Federal Reserve’s HQ in Washington today, where policymakers are pondering whether to end seven years of record low borrowing costs:Here’s the Federal Reserve’s HQ in Washington today, where policymakers are pondering whether to end seven years of record low borrowing costs:
2.22pm GMT14:222.22pm GMT14:22
Three months ago, there was genuine uncertainly over whether the Fed would raise interest rates or not (in the end they didn’t, of course).Three months ago, there was genuine uncertainly over whether the Fed would raise interest rates or not (in the end they didn’t, of course).
But today’s decision is a no-brainer, at least according to Kully Samra, a managing director at investment manager Charles Schwab, who says:But today’s decision is a no-brainer, at least according to Kully Samra, a managing director at investment manager Charles Schwab, who says:
“It is a foregone conclusion that the Fed is going to raise rates.”“It is a foregone conclusion that the Fed is going to raise rates.”
(The latest pricing from the financial markets suggests there s a 78% chance of a rate hike tonight)(The latest pricing from the financial markets suggests there s a 78% chance of a rate hike tonight)
2.08pm GMT14:082.08pm GMT14:08
Just five hours to go....Just five hours to go....
Waiting for the Fed pic.twitter.com/RwHv2Knb5vWaiting for the Fed pic.twitter.com/RwHv2Knb5v
1.54pm GMT13:541.54pm GMT13:54
One thing is certain. Whatever the Fed say today will be a lot less alarming than the statement they issued on December 17 2008 as the biggest financial crisis in generations swirled.One thing is certain. Whatever the Fed say today will be a lot less alarming than the statement they issued on December 17 2008 as the biggest financial crisis in generations swirled.
By delicious timing, today is the seventh anniversary of the historic rate cut that brought the Fed fund rate down to almost zero.By delicious timing, today is the seventh anniversary of the historic rate cut that brought the Fed fund rate down to almost zero.
And here’s how they announced it:And here’s how they announced it:
The birth announcement of ZIRP https://t.co/7uzV3fytoW pic.twitter.com/B48MfJq1DNThe birth announcement of ZIRP https://t.co/7uzV3fytoW pic.twitter.com/B48MfJq1DN
1.29pm GMT13:291.29pm GMT13:29
Hat-tip to Bloomberg’s Lorcan Roche Kelly for this info:Hat-tip to Bloomberg’s Lorcan Roche Kelly for this info:
#TheLastTimeTheFedHiked it was the end of a 2 year cycle that saw SEVENTEEN Fed rate rises. In case Yellen says 'slower pace than previous'#TheLastTimeTheFedHiked it was the end of a 2 year cycle that saw SEVENTEEN Fed rate rises. In case Yellen says 'slower pace than previous'
Updated at 1.29pm GMTUpdated at 1.29pm GMT
1.28pm GMT13:281.28pm GMT13:28
The Jubilee Debt Campaign, the anti-poverty charity, has warned that a US interest rate rise would bring new pain to world’s poorest countries.The Jubilee Debt Campaign, the anti-poverty charity, has warned that a US interest rate rise would bring new pain to world’s poorest countries.
Their director, Sarah-Jayne Clifton, says:Their director, Sarah-Jayne Clifton, says:
“Many developing countries are already suffering from a fall in prices of their commodity exports. An increase in US interest rates will compound this further, further weakening exchange rates and increasing debt payments.“Many developing countries are already suffering from a fall in prices of their commodity exports. An increase in US interest rates will compound this further, further weakening exchange rates and increasing debt payments.
It’s already been a tough year for emerging market currencies. The Malasian Ringgit, for example, has shed almost a quarter of its value against the US dollar since January. Brazil’s Real has tumbled by over 40%.It’s already been a tough year for emerging market currencies. The Malasian Ringgit, for example, has shed almost a quarter of its value against the US dollar since January. Brazil’s Real has tumbled by over 40%.
Updated at 1.45pm GMTUpdated at 1.45pm GMT
1.13pm GMT13:131.13pm GMT13:13
There are several reasons why the Fed should raise interest rates today, and just as many reasons for caution.There are several reasons why the Fed should raise interest rates today, and just as many reasons for caution.
The “hike now” brigade can point to the jobless rate. At just 5%, it is close to the measure of ‘full employment’ where wages could soon spike (although today’s UK employment report, showing record employment and lower wage growth, rather undermines that theory!)The “hike now” brigade can point to the jobless rate. At just 5%, it is close to the measure of ‘full employment’ where wages could soon spike (although today’s UK employment report, showing record employment and lower wage growth, rather undermines that theory!)
Inflation is picking up (although at just 0.5% it’s hardly red-hot). And there’s the argument that a modest rate rise now reduces the danger that Janet Yellen has to aggressively hike in the future.Inflation is picking up (although at just 0.5% it’s hardly red-hot). And there’s the argument that a modest rate rise now reduces the danger that Janet Yellen has to aggressively hike in the future.
But this is not an easy call. The Federal Reserve needs to consider the impact on the world economy. Huge amounts of capital flowed into emerging markets in recent years, and is now heading back to the US - destabilising developing economies and weakening their currencies. That could have a knock-in effect on the US economy, especially if a stronger dollar makes exports less attractive overseas.But this is not an easy call. The Federal Reserve needs to consider the impact on the world economy. Huge amounts of capital flowed into emerging markets in recent years, and is now heading back to the US - destabilising developing economies and weakening their currencies. That could have a knock-in effect on the US economy, especially if a stronger dollar makes exports less attractive overseas.
And while the US labour market looks solid at first glance, wage growth is still modest. And the proportion of people who have dropped out of the labour market is the highest since 1977.And while the US labour market looks solid at first glance, wage growth is still modest. And the proportion of people who have dropped out of the labour market is the highest since 1977.
Ultimately, the Fed may conclude that raising rates today is simply less disruptive than shocking the markets by leaving them on hold.Ultimately, the Fed may conclude that raising rates today is simply less disruptive than shocking the markets by leaving them on hold.
This chart from the Economist (printed before yesterday’s inflation data showed CPI had risen from 0.2% to 0.5%), outlines the issues in more detail:This chart from the Economist (printed before yesterday’s inflation data showed CPI had risen from 0.2% to 0.5%), outlines the issues in more detail:
The case for and against an interest-rate hike https://t.co/FBvxXL62Qj pic.twitter.com/uQR98zuks6The case for and against an interest-rate hike https://t.co/FBvxXL62Qj pic.twitter.com/uQR98zuks6
1.00pm GMT13:001.00pm GMT13:00
Raising interest rates is not quite as simple a process as you might expect, especially if you’re starting from zero.Raising interest rates is not quite as simple a process as you might expect, especially if you’re starting from zero.
The FT’s Robin Wigglesworth has examined the process here, and explained why it might be bumpy.The FT’s Robin Wigglesworth has examined the process here, and explained why it might be bumpy.
How the US Federal Reserve intends to raise ratesHow the US Federal Reserve intends to raise rates
As Robin explains, the Fed’s traditional weapon is its “funds rate”, which has been stuck at between zero and 0.25 per cent for exactly seven years.As Robin explains, the Fed’s traditional weapon is its “funds rate”, which has been stuck at between zero and 0.25 per cent for exactly seven years.
This rate determines how much commercial banks are paid to leave funds at the Fed’s vaults. By keeping it so low for so long, the Fed has been trying to encourage banks to put their money to work elsewhere.This rate determines how much commercial banks are paid to leave funds at the Fed’s vaults. By keeping it so low for so long, the Fed has been trying to encourage banks to put their money to work elsewhere.
Most economists believe that the Fed will raise the funds rate to 0.5% at today’s meeting. That should ripple out across the market, as banks won’t be prepared to lend to anyone for less than they could get from the Fed.Most economists believe that the Fed will raise the funds rate to 0.5% at today’s meeting. That should ripple out across the market, as banks won’t be prepared to lend to anyone for less than they could get from the Fed.
But in practice, many lenders cannot access the Fed’s fund rate directly, And with so much money swirling in the system,But in practice, many lenders cannot access the Fed’s fund rate directly, And with so much money swirling in the system,
So the Fed might use a different weapon to push borrowing costs up.So the Fed might use a different weapon to push borrowing costs up.
Over to Robin....Over to Robin....
Acting as a floor for now at 0.05 per cent, the overnight reverse repo programme, or Overnight RRP, is primarily aimed at money market funds, and is expected to do much of the heavy lifting.Acting as a floor for now at 0.05 per cent, the overnight reverse repo programme, or Overnight RRP, is primarily aimed at money market funds, and is expected to do much of the heavy lifting.
In a typical RRP the Fed’s market desk sells a Treasury bond from its portfolio to a money-market fund and agrees to buy it back the next day at a certain price, a process known as “repo”, short for repurchase. In practice, the central bank’s balance sheet does not shrink, but this sets a benchmark for cash interest rates paid by the Fed itself. These RRP operations will happen every business day between 12.45pm and 1.15pm in New York.In a typical RRP the Fed’s market desk sells a Treasury bond from its portfolio to a money-market fund and agrees to buy it back the next day at a certain price, a process known as “repo”, short for repurchase. In practice, the central bank’s balance sheet does not shrink, but this sets a benchmark for cash interest rates paid by the Fed itself. These RRP operations will happen every business day between 12.45pm and 1.15pm in New York.
The Fed might need to boost its RRP activities considerably, in order to transmit higher borrowing costs into the market. And that means that the process might not be as smooth as one might like....The Fed might need to boost its RRP activities considerably, in order to transmit higher borrowing costs into the market. And that means that the process might not be as smooth as one might like....
12.36pm GMT12:3612.36pm GMT12:36
The New York stock market is expected to follow Europe’s lead, when trading begins in two hours time.The New York stock market is expected to follow Europe’s lead, when trading begins in two hours time.
The futures market suggests the Dow Jones industrial average will jump by 104 points, or 0.6%, when Wall Street opens.The futures market suggests the Dow Jones industrial average will jump by 104 points, or 0.6%, when Wall Street opens.
12.20pm GMT12:2012.20pm GMT12:20
CNBC points out that it’s eleven and a half-years since the Federal Reserve began its last ‘tightening cycle’ (starting the process of raising interest rates) in summer 2004.CNBC points out that it’s eleven and a half-years since the Federal Reserve began its last ‘tightening cycle’ (starting the process of raising interest rates) in summer 2004.
If the Fed hikes today, it will have been more than 11 years since the last tightening cycle cc: @steveliesman pic.twitter.com/8DYJ12DhiVIf the Fed hikes today, it will have been more than 11 years since the last tightening cycle cc: @steveliesman pic.twitter.com/8DYJ12DhiV
That last cycle lasted two years, and was ended by the credit crunch in 2007.That last cycle lasted two years, and was ended by the credit crunch in 2007.
The next cycle is likely to move slowly, with the Fed possibly only raising interest rates twice next year....The next cycle is likely to move slowly, with the Fed possibly only raising interest rates twice next year....
Updated at 1.29pm GMTUpdated at 1.29pm GMT
12.00pm GMT12:0012.00pm GMT12:00
In seven hours time, three Wall Street economists will either feel a bit daft or incredibly astute.....In seven hours time, three Wall Street economists will either feel a bit daft or incredibly astute.....
Out of 105 economists surveyed by Bloomberg, 3 don't expect to see a hike today.Out of 105 economists surveyed by Bloomberg, 3 don't expect to see a hike today.
Here are the three economists. pic.twitter.com/MCR6ZDrybdHere are the three economists. pic.twitter.com/MCR6ZDrybd
11.31am GMT11:3111.31am GMT11:31
European stocks jump ahead of Fed decisionEuropean stocks jump ahead of Fed decision
European stock markets are now rallying as investors anticipate that the long period of record low US interest rates will end tonight.European stock markets are now rallying as investors anticipate that the long period of record low US interest rates will end tonight.
There are still more than seven and a half hours until the Federal Reserve announces its decision. As covered in the introduction, the Fed will probably hike rates from the current low of 0% to 0.25%, ending seven years of historically easy money.There are still more than seven and a half hours until the Federal Reserve announces its decision. As covered in the introduction, the Fed will probably hike rates from the current low of 0% to 0.25%, ending seven years of historically easy money.
Alastair McCaig of IG says a rate hike is widely expected:Alastair McCaig of IG says a rate hike is widely expected:
Fed Chair Janet Yellen has already told Santa what she wants as an early Christmas present and only time will tell if she has been good enough to get it.Fed Chair Janet Yellen has already told Santa what she wants as an early Christmas present and only time will tell if she has been good enough to get it.
Over 95% of institutional analysts are calling for a 25 basis point increase and futures markets are factoring in an 80% chance that is what we will see.Over 95% of institutional analysts are calling for a 25 basis point increase and futures markets are factoring in an 80% chance that is what we will see.
And that certainty is pushing shares higher. It follows a strong session in Asia, where the Japanese and Australian markets both gained more than 2%.And that certainty is pushing shares higher. It follows a strong session in Asia, where the Japanese and Australian markets both gained more than 2%.
There’s also plenty of speculation that we’ll get a ‘dovish hike’; Janet Yellen may emphasise that rates will still rise slowly, and only if the data justifies it.There’s also plenty of speculation that we’ll get a ‘dovish hike’; Janet Yellen may emphasise that rates will still rise slowly, and only if the data justifies it.
Britain’s FTSE 100 of top blue-chip shares is leading the rally risen by 48 points to 6066, a gain of 0.8%.Britain’s FTSE 100 of top blue-chip shares is leading the rally risen by 48 points to 6066, a gain of 0.8%.
European markets are being boosted by this morning’s PMI surveys from Markit. They show that the eurozone’s private sector has posted its strongest quarter in four and a half-years.European markets are being boosted by this morning’s PMI surveys from Markit. They show that the eurozone’s private sector has posted its strongest quarter in four and a half-years.
Updated at 11.32am GMTUpdated at 11.32am GMT
11.07am GMT11:0711.07am GMT11:07
News story: UK pay growth slowsNews story: UK pay growth slows
The drop in wage growth is a reminder that many families will enter 2016 in a worrying financial position.The drop in wage growth is a reminder that many families will enter 2016 in a worrying financial position.
My colleague Heather Stewart writes:My colleague Heather Stewart writes:
Wage growth across the economy has slowed to 2%, underlining the financial challenges facing households in the run-up to Christmas.Wage growth across the economy has slowed to 2%, underlining the financial challenges facing households in the run-up to Christmas.
The Office for National Statistics (ONS) said that average wages grew at an annual rate of 2% in the three months to October.The Office for National Statistics (ONS) said that average wages grew at an annual rate of 2% in the three months to October.
That marked a significant weakening from the 2.4% growth seen in the previous three-monthly period. With inflation running at just 0.1%, living standards are still rising, on average. But anaemic pay growth undermines hopes that household balance sheets will continue to improve after the long post-recession squeeze that saw pay flat or falling for several years.That marked a significant weakening from the 2.4% growth seen in the previous three-monthly period. With inflation running at just 0.1%, living standards are still rising, on average. But anaemic pay growth undermines hopes that household balance sheets will continue to improve after the long post-recession squeeze that saw pay flat or falling for several years.
Once bonuses were included, pay growth in the three months to October was still just 2.4%, down from 3% over July to September, the ONS said.Once bonuses were included, pay growth in the three months to October was still just 2.4%, down from 3% over July to September, the ONS said.
Here’s her story on today’s unemployment report:Here’s her story on today’s unemployment report:
Related: UK jobs data: pay growth slows to 2%Related: UK jobs data: pay growth slows to 2%
10.58am GMT10:5810.58am GMT10:58
IoD: We're heading towards full employmentIoD: We're heading towards full employment
Britain’s bosses argue that they need to achieve higher productivity in order to fund pay rises.Britain’s bosses argue that they need to achieve higher productivity in order to fund pay rises.
Michael Martins, economic analyst at the Institute of Directors, says the UK labour market looks in good shape:Michael Martins, economic analyst at the Institute of Directors, says the UK labour market looks in good shape:
“Yet again, these latest jobs figures make for welcome reading. The facts are impressive, and, given the turbulence which is affecting many parts of the world, worth repeating. In nearly every aspect, the labour market is tightening. The employment rate is at its highest ever level, the unemployment rate is down to its lowest since well before the crash at 5.2%, and youth unemployment – always a tricky problem to solve – continues to fall impressively. All of this indicates we are closing in on full employment.“Yet again, these latest jobs figures make for welcome reading. The facts are impressive, and, given the turbulence which is affecting many parts of the world, worth repeating. In nearly every aspect, the labour market is tightening. The employment rate is at its highest ever level, the unemployment rate is down to its lowest since well before the crash at 5.2%, and youth unemployment – always a tricky problem to solve – continues to fall impressively. All of this indicates we are closing in on full employment.
But on wages, Martins points out that productivity increases have not matched this year’s pay rises.But on wages, Martins points out that productivity increases have not matched this year’s pay rises.
He also suggests that the sight of inflation turning negative this year may have undermined the case for bumper pay claims.He also suggests that the sight of inflation turning negative this year may have undermined the case for bumper pay claims.
“Firms may be taking advantage of the low-inflation era to offer smaller nominal increases in salaries while employees who have benefitted from cheaper food and fuel prices may not be demanding as much.“Firms may be taking advantage of the low-inflation era to offer smaller nominal increases in salaries while employees who have benefitted from cheaper food and fuel prices may not be demanding as much.
Since so many jobs are still being created, and young and long-term unemployed people are moving back in to work, these new jobs may simply pay less, dragging down the average figures.Since so many jobs are still being created, and young and long-term unemployed people are moving back in to work, these new jobs may simply pay less, dragging down the average figures.
10.48am GMT10:4810.48am GMT10:48
Classic economics teaching would suggest that wage growth should be accelerating as the unemployment rate drops (as firms are forced to stump up more to attract staff).Classic economics teaching would suggest that wage growth should be accelerating as the unemployment rate drops (as firms are forced to stump up more to attract staff).
As Dr John Philpott, director of The Jobs Economist, points out, this isn’t happening right now:As Dr John Philpott, director of The Jobs Economist, points out, this isn’t happening right now:
There is a palpable sense of “pàyjé vu” in the labour market, a reminder of the initial phase of the economic recovery characterized by a jobs boom alongside weak productivity and pay growth.There is a palpable sense of “pàyjé vu” in the labour market, a reminder of the initial phase of the economic recovery characterized by a jobs boom alongside weak productivity and pay growth.
What’s most surprising it that for all the talk of mounting skills shortages employers appear perfectly capable of hiring at will without having to hike pay rates.What’s most surprising it that for all the talk of mounting skills shortages employers appear perfectly capable of hiring at will without having to hike pay rates.
10.29am GMT10:2910.29am GMT10:29
Pound hit by poor wage growthPound hit by poor wage growth
The pound is falling against the US dollar, losing half a cent to $1.4992.The pound is falling against the US dollar, losing half a cent to $1.4992.
Traders are calculating that the weak pay growth means there’s even less chance that UK interest rates will rise soon.Traders are calculating that the weak pay growth means there’s even less chance that UK interest rates will rise soon.
Bank of England policymakers have repeatedly said they want to see solid wage growth before hiking borrowing costs. So the sharp drop in average pay rises, to 2%, gives them another reason to sit tight.Bank of England policymakers have repeatedly said they want to see solid wage growth before hiking borrowing costs. So the sharp drop in average pay rises, to 2%, gives them another reason to sit tight.
Average earnings - still well below 2008 levels. Unprecedented in recent economic history & explains BoE caution pic.twitter.com/tmB2Ue2wJrAverage earnings - still well below 2008 levels. Unprecedented in recent economic history & explains BoE caution pic.twitter.com/tmB2Ue2wJr
10.06am GMT10:0610.06am GMT10:06
Today’s report shows that Britain’s bosses tightened the purse-strings in October.Today’s report shows that Britain’s bosses tightened the purse-strings in October.
Regular pay, excluding bonuses, rose by just 1.7% during that month. That dragged pay growth during the August-October quarter down to 2% from 2.5%.Regular pay, excluding bonuses, rose by just 1.7% during that month. That dragged pay growth during the August-October quarter down to 2% from 2.5%.
Even when bonuses are included, total pay dropped to 1.9% in October - much lower than the 3% recorded in July-September.Even when bonuses are included, total pay dropped to 1.9% in October - much lower than the 3% recorded in July-September.
In October UK total pay growth dipped to 1.9% which is real pay growth but shows a troubling fading #GBP #BoEIn October UK total pay growth dipped to 1.9% which is real pay growth but shows a troubling fading #GBP #BoE
Updated at 10.06am GMTUpdated at 10.06am GMT
9.59am GMT09:599.59am GMT09:59
Unemployment: The Key PointsUnemployment: The Key Points
Here’s the top line analysis of today’s unemployment report, from the Office for National Statistics.Here’s the top line analysis of today’s unemployment report, from the Office for National Statistics.
It shows that employment levels in Britain hit record highs, joblessness fall again, but wage growth went off the boil:It shows that employment levels in Britain hit record highs, joblessness fall again, but wage growth went off the boil:
9.58am GMT09:589.58am GMT09:58
Unemployment falls - good, Wages also fall - not so good #gbpUnemployment falls - good, Wages also fall - not so good #gbp
9.49am GMT09:499.49am GMT09:49
Pay rises may be falling because employers have noticed that inflation has been hovering around zero all year.Pay rises may be falling because employers have noticed that inflation has been hovering around zero all year.
Low inflation feeding into lower pay in the UK. GBP nods lowerLow inflation feeding into lower pay in the UK. GBP nods lower
The UK consumer prices index is currently 0.1%, meaning pay rises are not being eaten up by inflation.The UK consumer prices index is currently 0.1%, meaning pay rises are not being eaten up by inflation.
But real wage increases of 2% are still modest in historical terms, especially when you remember that workers suffered falling real wages for several years after the financial crisis began.But real wage increases of 2% are still modest in historical terms, especially when you remember that workers suffered falling real wages for several years after the financial crisis began.
9.45am GMT09:459.45am GMT09:45
This chart shows how UK pay growth slowed sharply last quarter:This chart shows how UK pay growth slowed sharply last quarter:
9.41am GMT09:419.41am GMT09:41
UK wage growth slows, as unemployment rate falls againUK wage growth slows, as unemployment rate falls again
The latest UK unemployment report is out, and it shows a sharp, and worrying, slowdown in pay growth.The latest UK unemployment report is out, and it shows a sharp, and worrying, slowdown in pay growth.
The good news is that the unemployment rate has fallen to 5.2%, which is the lowest level since 2008 - the start of the financial crisis. It hasn’t been lower since January 2006.The good news is that the unemployment rate has fallen to 5.2%, which is the lowest level since 2008 - the start of the financial crisis. It hasn’t been lower since January 2006.
And the employment rate has risen to 73.9%, the highest since comparable records began in 1971.And the employment rate has risen to 73.9%, the highest since comparable records began in 1971.
BUT wage growth has slowed alarmingly.BUT wage growth has slowed alarmingly.
Average earnings, excluding bonuses, increased by just 2% annually in the three months to October. That’s sharply down on the 2.4% recorded in the three months to September, and is the slowest rate since early 2015.Average earnings, excluding bonuses, increased by just 2% annually in the three months to October. That’s sharply down on the 2.4% recorded in the three months to September, and is the slowest rate since early 2015.
Pay including bonuses rose by 2.4% during the quarter, down from 3% in the three months to September.Pay including bonuses rose by 2.4% during the quarter, down from 3% in the three months to September.
It suggests that the welcome boost in real earnings earlier this year may already be petering out....It suggests that the welcome boost in real earnings earlier this year may already be petering out....
More to follow....More to follow....
Updated at 10.09am GMTUpdated at 10.09am GMT
9.32am GMT09:329.32am GMT09:32
Analyst: Fed decision will create more volatilityAnalyst: Fed decision will create more volatility
Investors should avoid going anywhere too exotic over Christmas, as the Federal Reserve could provoke fresh upheaval in the markets.Investors should avoid going anywhere too exotic over Christmas, as the Federal Reserve could provoke fresh upheaval in the markets.
That’s according to Peter Rosenstreich, head of market strategy at Swissquote Bank.That’s according to Peter Rosenstreich, head of market strategy at Swissquote Bank.
He says that today’s “highly anticipated and overly hyped FOMC December meeting” will probably spark significant volatility -- many younger traders on Wall Street haven’t experienced a rate hike before, after all.He says that today’s “highly anticipated and overly hyped FOMC December meeting” will probably spark significant volatility -- many younger traders on Wall Street haven’t experienced a rate hike before, after all.
We are unconvinced that global markets will stabilize after the FOMC decision, so traders should keep their vacations local.We are unconvinced that global markets will stabilize after the FOMC decision, so traders should keep their vacations local.
Rosenstreich also predicts that higher borrowing costs will force more junk bonds into default:Rosenstreich also predicts that higher borrowing costs will force more junk bonds into default:
There have been worrying swings in high yield credit spreads (and Third Avenue’s collapse) indicting the debt market’s anxiety with adapting to the new tightening era. As pointed out by the Financial Times today the $1.3tn junk bond markets has relied heavily on endless cheap money. While so far only the energy sectors have been truly effected we suspect that defaults will quickly spread as the cost of funding swiftly rises.”There have been worrying swings in high yield credit spreads (and Third Avenue’s collapse) indicting the debt market’s anxiety with adapting to the new tightening era. As pointed out by the Financial Times today the $1.3tn junk bond markets has relied heavily on endless cheap money. While so far only the energy sectors have been truly effected we suspect that defaults will quickly spread as the cost of funding swiftly rises.”
(Third Avenue announced last week it was shutting its Focused Credit Fund, which invested in high-yield (and thus riskier) assets)(Third Avenue announced last week it was shutting its Focused Credit Fund, which invested in high-yield (and thus riskier) assets)
9.01am GMT09:019.01am GMT09:01
Tension is rising in the City, even though there’s AGES until the Fed delivers its decision (at 7pm GMT or 2pm East Coast time)Tension is rising in the City, even though there’s AGES until the Fed delivers its decision (at 7pm GMT or 2pm East Coast time)
Only 10hrs until the decision! *grits teeth, shakes desk*Only 10hrs until the decision! *grits teeth, shakes desk*
Fed watchers. Today. pic.twitter.com/1ZmzETDk0FFed watchers. Today. pic.twitter.com/1ZmzETDk0F
8.58am GMT08:588.58am GMT08:58
Kit Juckes, top currency strategist at French bank Société Générale is Fed up (geddit?!) after months of speculation about today’s central bank meeting, and the twists and turns in the foreign exchange market.Kit Juckes, top currency strategist at French bank Société Générale is Fed up (geddit?!) after months of speculation about today’s central bank meeting, and the twists and turns in the foreign exchange market.
At this point, my brain’s scrambled. Yesterday was all about positions being taken off, but did I know that would mean option expiries taking EUR/USD sharply lower in the afternoon? No I did not...At this point, my brain’s scrambled. Yesterday was all about positions being taken off, but did I know that would mean option expiries taking EUR/USD sharply lower in the afternoon? No I did not...
We’ve waited so long for this policy move that the initial reaction may be meaningless. Beyond the very short term however, the US economy will go on growing, the Fed will hike further, and the dollar will rally through 2016.We’ve waited so long for this policy move that the initial reaction may be meaningless. Beyond the very short term however, the US economy will go on growing, the Fed will hike further, and the dollar will rally through 2016.
8.55am GMT08:558.55am GMT08:55
A cautious start to trading in Europe has seen some stock markets dip into the red:A cautious start to trading in Europe has seen some stock markets dip into the red:
After strong rallies yesterday, investors may be getting a dose of pre-Fed jitters:After strong rallies yesterday, investors may be getting a dose of pre-Fed jitters:
Conner Campbell of SpreadEx explains:Conner Campbell of SpreadEx explains:
It’s finally here! December’s Fed Wednesday is upon us and with it the likely end to the year-long uncertainty over when exactly the central bank is going to raise interest rates.It’s finally here! December’s Fed Wednesday is upon us and with it the likely end to the year-long uncertainty over when exactly the central bank is going to raise interest rates.
Yet with nothing certain until the big reveal this evening the markets are looking pretty jittery, the European open suffering a case of pre-game nerves after yesterday’s aggressive rebound.Yet with nothing certain until the big reveal this evening the markets are looking pretty jittery, the European open suffering a case of pre-game nerves after yesterday’s aggressive rebound.
8.43am GMT08:438.43am GMT08:43
It is exactly seven years since the Federal Reserve cut interest rates to their current record lows of between zero and 0.25%.It is exactly seven years since the Federal Reserve cut interest rates to their current record lows of between zero and 0.25%.
That historic decision was taken in December 2008 -- a few weeks after Barack Obama won the US presidential election. At the time, few people thought rates would stay so low for so long.That historic decision was taken in December 2008 -- a few weeks after Barack Obama won the US presidential election. At the time, few people thought rates would stay so low for so long.
Indeed, Ben Bernanke has admitted as much. The former Fed chair told Marketwatch that policymakers expected the economy would grow faster:Indeed, Ben Bernanke has admitted as much. The former Fed chair told Marketwatch that policymakers expected the economy would grow faster:
We were over-optimistic about the pace of growth in large part because we didn’t anticipate the slowdown in productivity growth that we’ve seen. However, from a cyclical perspective, the economy has recovered in fact more quickly than we anticipated in that the unemployment rate has fallen more quickly than we thought it would, indicating that we have moved back towards something approaching full employment.We were over-optimistic about the pace of growth in large part because we didn’t anticipate the slowdown in productivity growth that we’ve seen. However, from a cyclical perspective, the economy has recovered in fact more quickly than we anticipated in that the unemployment rate has fallen more quickly than we thought it would, indicating that we have moved back towards something approaching full employment.
Over the last three years, the unemployment rate has fallen about 3 percentage points which is relatively rapid, so, in that respect, the economy has actually done a little better than we have anticipated but in terms of overall growth it’s been less good.Over the last three years, the unemployment rate has fallen about 3 percentage points which is relatively rapid, so, in that respect, the economy has actually done a little better than we have anticipated but in terms of overall growth it’s been less good.
8.35am GMT08:358.35am GMT08:35
Germany has outperformed France (again).Germany has outperformed France (again).
The German private sector is growing at a healthy rate this month, with the ‘composite PMI’ coming in at 54.9, close to November’s 55.2.The German private sector is growing at a healthy rate this month, with the ‘composite PMI’ coming in at 54.9, close to November’s 55.2.
LATEST: German economic expansion is accelerating, manufacturing and services index suggests https://t.co/gLZnGaHCEs pic.twitter.com/ubYIYqV91gLATEST: German economic expansion is accelerating, manufacturing and services index suggests https://t.co/gLZnGaHCEs pic.twitter.com/ubYIYqV91g
Updated at 11.11am GMTUpdated at 11.11am GMT
8.19am GMT08:198.19am GMT08:19
French private sector growth hit by Paris attacksFrench private sector growth hit by Paris attacks
The first economic data of the day is disappointing.The first economic data of the day is disappointing.
France’s private sector has slowed to near-stagnation this month, with service sector firms reporting a slump in new business following November’s terrorist attacks.France’s private sector has slowed to near-stagnation this month, with service sector firms reporting a slump in new business following November’s terrorist attacks.
Data firm Markit’s composite output index, which tracks thousands of French firms, fell to 50.3 in December from 51.0 in November. That’s worryingly close to the 50-point mark that separates growth from contraction.Data firm Markit’s composite output index, which tracks thousands of French firms, fell to 50.3 in December from 51.0 in November. That’s worryingly close to the 50-point mark that separates growth from contraction.
Although manufacturing firms reported faster growth, service sector providers experienced the slowest rise in new work since August.Although manufacturing firms reported faster growth, service sector providers experienced the slowest rise in new work since August.
Jack Kennedy, senior economist at Markit, explains:Jack Kennedy, senior economist at Markit, explains:
“French private sector output growth nearly ground to a halt at the end of 2015 amid faltering new business intakes.“French private sector output growth nearly ground to a halt at the end of 2015 amid faltering new business intakes.
A slowdown in the dominant service sector was the driver, with some panellists indicating that their new business intakes had been impacted following the recent terrorist attacks.A slowdown in the dominant service sector was the driver, with some panellists indicating that their new business intakes had been impacted following the recent terrorist attacks.
Shares in hotel groups and airlines fell in the aftermath of the Paris atrocities, as analysts warned that tourism would suffer.Shares in hotel groups and airlines fell in the aftermath of the Paris atrocities, as analysts warned that tourism would suffer.
France’s economy expanded by just 0.3% in the last quarter, not enough to lower its record unemployment rate. This PMI report suggests that growth may be slowing...France’s economy expanded by just 0.3% in the last quarter, not enough to lower its record unemployment rate. This PMI report suggests that growth may be slowing...
Updated at 11.11am GMTUpdated at 11.11am GMT
8.12am GMT08:128.12am GMT08:12
My US colleague Jana Kasperkevic has pulled together a guide to today’s Federal Reserve meeting:My US colleague Jana Kasperkevic has pulled together a guide to today’s Federal Reserve meeting:
Related: Will interest rates rise? Your guide to the Fed's upcoming meetingRelated: Will interest rates rise? Your guide to the Fed's upcoming meeting
8.08am GMT08:088.08am GMT08:08
There are no early dramas in the European sovereign debt markets.There are no early dramas in the European sovereign debt markets.
Government bonds are changing hands at similar prices to last night, suggesting we’re in a holding pattern ahead of the Fed:Government bonds are changing hands at similar prices to last night, suggesting we’re in a holding pattern ahead of the Fed:
Minimum activity in bonds ahead of FOMC decision as rate hike fully priced in after 7yrs of zero interest rate pol. pic.twitter.com/1UnvSvaFRTMinimum activity in bonds ahead of FOMC decision as rate hike fully priced in after 7yrs of zero interest rate pol. pic.twitter.com/1UnvSvaFRT
Some analysts, such as London Capital Market’s Ipek Ozkardeskaya, just want the whole thing to be over:Some analysts, such as London Capital Market’s Ipek Ozkardeskaya, just want the whole thing to be over:
I am already tired of the #Fed. And even the new concept of 'dovish hike'.I am already tired of the #Fed. And even the new concept of 'dovish hike'.
7.59am GMT07:597.59am GMT07:59
Central bank decision rooms are rarely places of peace and tranquility (as regular observers of the European Central Bank know well!).Central bank decision rooms are rarely places of peace and tranquility (as regular observers of the European Central Bank know well!).
And the members of the Federal Reserve’s Open Market Committee (FOMC) are unlikely to be united at today’s meeting.And the members of the Federal Reserve’s Open Market Committee (FOMC) are unlikely to be united at today’s meeting.
Michael Hewson of CMC Markets reckons as many as three policymakers could oppose a 25 basis point hike in rates today:Michael Hewson of CMC Markets reckons as many as three policymakers could oppose a 25 basis point hike in rates today:
Given the Fed’s ability to surprise and the current uncertain environment does it seem likely that the Fed will do as the market expects, or could we see a seriously split vote of at least three dissenters, with Evans, Brainard and Tarullo the most likely candidates? We need to consider the divergent nature of views aired in recent weeks which are bound to come into play and there is also the remote possibility that we could see a fudge that pleases nobody, and catches the market by surprise.Given the Fed’s ability to surprise and the current uncertain environment does it seem likely that the Fed will do as the market expects, or could we see a seriously split vote of at least three dissenters, with Evans, Brainard and Tarullo the most likely candidates? We need to consider the divergent nature of views aired in recent weeks which are bound to come into play and there is also the remote possibility that we could see a fudge that pleases nobody, and catches the market by surprise.
Hewson also suggests that the Fed could surprise investors:Hewson also suggests that the Fed could surprise investors:
A surprise could take the form of a band hike of 12.5 basis points, as opposed to 25, or the removal of the lower bound to a fixed rate of 0.25%.A surprise could take the form of a band hike of 12.5 basis points, as opposed to 25, or the removal of the lower bound to a fixed rate of 0.25%.
Moving the rate by 12.5 basis points wouldn’t be an unusual state of affairs given that this was done on a periodic basis in the 1980’s, but it would fly in the face of market expectations, and would certainly be a case of back to the future.Moving the rate by 12.5 basis points wouldn’t be an unusual state of affairs given that this was done on a periodic basis in the 1980’s, but it would fly in the face of market expectations, and would certainly be a case of back to the future.
7.52am GMT07:527.52am GMT07:52
Asian markets rally ahead of the FedAsian markets rally ahead of the Fed
Over in Asia, shares have bounced overnight as investors digested the prospect of a US interest rate hike tonight.Over in Asia, shares have bounced overnight as investors digested the prospect of a US interest rate hike tonight.
In Tokyo, the Nikkei reversed two days of losses to close 2.6% higher. And Australia’s S&P/ASX 200 bounced back from a three-year low, gaining 2.4%.In Tokyo, the Nikkei reversed two days of losses to close 2.6% higher. And Australia’s S&P/ASX 200 bounced back from a three-year low, gaining 2.4%.
The rally suggests that traders are pleased that the seemingly endless speculation over a Fed rate hike will probably end today.The rally suggests that traders are pleased that the seemingly endless speculation over a Fed rate hike will probably end today.
As Angus Nicholson of IG put it:As Angus Nicholson of IG put it:
The rally we are seeing in equity markets indicates that they are likely to respond well to a rate hike at the decision today as certainty in the direction of Fed policy should bring some stability to markets.The rally we are seeing in equity markets indicates that they are likely to respond well to a rate hike at the decision today as certainty in the direction of Fed policy should bring some stability to markets.
7.39am GMT07:397.39am GMT07:39
City investors are approaching Fed Day in a cautious mood.City investors are approaching Fed Day in a cautious mood.
The FTSE 100 is expected to inch up by around 5 points when trading begins, having surged by 143 points, or 2.45%, yesterday.The FTSE 100 is expected to inch up by around 5 points when trading begins, having surged by 143 points, or 2.45%, yesterday.
Traders see 78% chance of hike today (Fed Funds Futures implying). Stocks rallying, volatility calming into decision pic.twitter.com/h5bxJijz80Traders see 78% chance of hike today (Fed Funds Futures implying). Stocks rallying, volatility calming into decision pic.twitter.com/h5bxJijz80
7.19am GMT07:19 7.32am GMT07:32
Introduction: Welcome to Fed DayIntroduction: Welcome to Fed Day
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
The waiting is nearly over. In just under 12 hours time, America’s central bank will announce whether it has taken the plunge and raised interest rates for the first time in nearly a decade.The waiting is nearly over. In just under 12 hours time, America’s central bank will announce whether it has taken the plunge and raised interest rates for the first time in nearly a decade.
Today’s Federal Reserve decision is the last major financial event of the year, and it really is a case of “all eyes on the Fed”.Today’s Federal Reserve decision is the last major financial event of the year, and it really is a case of “all eyes on the Fed”.
Good morning and happy FOMC day!Good morning and happy FOMC day!
A lot has happened since Ben Bernanke hiked interest rates in June 2006, to 5.25% – which may seem stratospheric to younger readers.A lot has happened since Ben Bernanke hiked interest rates in June 2006, to 5.25% – which may seem stratospheric to younger readers.
A year later the credit crunch struck, followed by the collapse of Lehman Brothers, the global recession, and unprecedented stimulus packages from the world’s central bankers which left US interest rates at just 0%-0.25%.A year later the credit crunch struck, followed by the collapse of Lehman Brothers, the global recession, and unprecedented stimulus packages from the world’s central bankers which left US interest rates at just 0%-0.25%.
Investors are widely expecting the Fed to start tightening monetary policy today. But if that happens, Fed chair Janet Yellen will probably take a dovish tone when she addresses the media at a press conference.Investors are widely expecting the Fed to start tightening monetary policy today. But if that happens, Fed chair Janet Yellen will probably take a dovish tone when she addresses the media at a press conference.
Yellen is likely to emphasise that future rate moves will remain “data-dependent”, meaning borrowing costs will stay low for some time. But will that be enough to prevent fresh turmoil in the foreign exchange, equities and commodity markets?Yellen is likely to emphasise that future rate moves will remain “data-dependent”, meaning borrowing costs will stay low for some time. But will that be enough to prevent fresh turmoil in the foreign exchange, equities and commodity markets?
The start of the Fed tightening cycle will surely cause some ructions in the markets in the weeks ahead. Anticipation of a hike has already driven emerging market currencies down and driven junk bonds into dangerous territory.The start of the Fed tightening cycle will surely cause some ructions in the markets in the weeks ahead. Anticipation of a hike has already driven emerging market currencies down and driven junk bonds into dangerous territory.
But there will surely also be some relief that the waiting is finally over. This saga has gone on long enough.....But there will surely also be some relief that the waiting is finally over. This saga has gone on long enough.....
What else is afoot?What else is afoot?
The Fed decision really is the main event today.The Fed decision really is the main event today.
But we can while away the time with new surveys of the eurozone economy, the latest UK unemployment data, and a second estimate of euro inflation.But we can while away the time with new surveys of the eurozone economy, the latest UK unemployment data, and a second estimate of euro inflation.
Ahead of the Fed, we've got euro area flash PMIs (topish services; Paris attacks) and final Nov HICP (upward revision likely).Ahead of the Fed, we've got euro area flash PMIs (topish services; Paris attacks) and final Nov HICP (upward revision likely).
Updated at 7.37am GMTUpdated at 7.37am GMT