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UK wage growth slows sharply - business live Markets rally ahead of Fed US interest rate decision - business live
(35 minutes later)
11.31am GMT11:31
European 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.
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:
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.
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.
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.
Updated 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 GMT07:197.19am GMT07:19
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