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| Markets await Federal Reserve interest rate decision – business live | Markets await Federal Reserve interest rate decision – business live |
| (35 minutes later) | |
| 6.14pm BST | |
| 18:14 | |
| Here’s a look at various probabilities for the Federal Reserve’s actions and comments, courtesy of John Kicklighter, chief strategist at DailyFX: | |
| Here's the FOMC scenario table I will be operating on tomorrow. Remember, rate, forecasts and Yellen pic.twitter.com/7Lu2mgPayR | |
| 6.09pm BST | |
| 18:09 | |
| Ahead of the Federal Reserve press conference due in just under an hour and a half, here’s the link to watch it live. | |
| 5.21pm BST | 5.21pm BST |
| 17:21 | 17:21 |
| European markets close higher ahead of the Fed | European markets close higher ahead of the Fed |
| After the Bank of Japan caught some observers by surprise with its new stimulus measures and boosted European markets, some of the gloss came off during the course of the day ahead of the Federal Reserve’s rate decision. As we’ve covered, most people believe the Fed will leave rates on hold, although there is still a chance it might catch markets on the hop with a surprise increase. And even if rates are left unchanged, investors will be looking for any hints from US Federal Reserve chair Janet Yellen about when borrowing costs might rise. In Europe the final scores showed: | After the Bank of Japan caught some observers by surprise with its new stimulus measures and boosted European markets, some of the gloss came off during the course of the day ahead of the Federal Reserve’s rate decision. As we’ve covered, most people believe the Fed will leave rates on hold, although there is still a chance it might catch markets on the hop with a surprise increase. And even if rates are left unchanged, investors will be looking for any hints from US Federal Reserve chair Janet Yellen about when borrowing costs might rise. In Europe the final scores showed: |
| On Wall Street, the Dow Jones Industrial Average is currently pretty flat, up just 2 points. | On Wall Street, the Dow Jones Industrial Average is currently pretty flat, up just 2 points. |
| 4.53pm BST | 4.53pm BST |
| 16:53 | 16:53 |
| Markets are betting on a no-change statement from the Federal Reserve on US interest rates but will be keen to hear the tone of the central bank’s comments, says strategist James Chen at City Index: | Markets are betting on a no-change statement from the Federal Reserve on US interest rates but will be keen to hear the tone of the central bank’s comments, says strategist James Chen at City Index: |
| Not much has changed from the past several weeks in terms of the very low expectations for a rate hike. If anything, [today’s Bank of Japan] announcement of new easing measures could even further discourage a Fed move, but as it already stands, there are very few market participants that are betting on such a move to higher interest rates, at least for this particular Fed meeting. Key Fed speakers and major US economic data releases have alternately shifted the discussion from one side to another in the past few weeks. Some members advocated a rate hike this year, even citing the possibility of one occurring in September, while others, like Fed Governor Lael Brainard, cautioned against raising interest rates too quickly. | Not much has changed from the past several weeks in terms of the very low expectations for a rate hike. If anything, [today’s Bank of Japan] announcement of new easing measures could even further discourage a Fed move, but as it already stands, there are very few market participants that are betting on such a move to higher interest rates, at least for this particular Fed meeting. Key Fed speakers and major US economic data releases have alternately shifted the discussion from one side to another in the past few weeks. Some members advocated a rate hike this year, even citing the possibility of one occurring in September, while others, like Fed Governor Lael Brainard, cautioned against raising interest rates too quickly. |
| Additionally, September has thus far seen a general deterioration of US economic data in the form of substantially worse-than-expected releases regarding employment (NFP), both the manufacturing and services industries (PMI), retail sales, and housing, that were all significantly worse than expected. The one potentially brighter spot for the Fed was the Consumer Price Index (CPI) inflation reading for August, which showed that both headline and core prices increased by more than expected. Despite this more buoyant view of inflation, however, it is still unlikely to be enough to sway the Fed into action today. | Additionally, September has thus far seen a general deterioration of US economic data in the form of substantially worse-than-expected releases regarding employment (NFP), both the manufacturing and services industries (PMI), retail sales, and housing, that were all significantly worse than expected. The one potentially brighter spot for the Fed was the Consumer Price Index (CPI) inflation reading for August, which showed that both headline and core prices increased by more than expected. Despite this more buoyant view of inflation, however, it is still unlikely to be enough to sway the Fed into action today. |
| Amidst all of these economic data releases and Fed member speeches, the market’s view of the implied probability of a rate hike today has continued to hover in the low-to-high teens. Of course, there could always be a surprise move, but the much more likely scenario will be a characteristically unmovable Fed. | Amidst all of these economic data releases and Fed member speeches, the market’s view of the implied probability of a rate hike today has continued to hover in the low-to-high teens. Of course, there could always be a surprise move, but the much more likely scenario will be a characteristically unmovable Fed. |
| Therefore, the market’s focus, as has consistently been the case from the beginning of the year, will be concentrated on the words emanating from the Fed statement as it relates to the indication of a possible rate hike in December and the potential pace of tightening going forward. The current market probability of a December hike remains around 60%. | Therefore, the market’s focus, as has consistently been the case from the beginning of the year, will be concentrated on the words emanating from the Fed statement as it relates to the indication of a possible rate hike in December and the potential pace of tightening going forward. The current market probability of a December hike remains around 60%. |
| The key markets to watch today, as always, will be US equity markets, gold, and the US dollar, particularly US dollar/Japanese yen due the earlier Bank of Japan announcement. A more hawkish Fed today could lead to a rebound for the dollar/yen while a more dovish statement could lead to a further drop for dollar/yen towards the key 100.00 mark and below. | The key markets to watch today, as always, will be US equity markets, gold, and the US dollar, particularly US dollar/Japanese yen due the earlier Bank of Japan announcement. A more hawkish Fed today could lead to a rebound for the dollar/yen while a more dovish statement could lead to a further drop for dollar/yen towards the key 100.00 mark and below. |
| Updated | Updated |
| at 4.55pm BST | at 4.55pm BST |
| 4.14pm BST | 4.14pm BST |
| 16:14 | 16:14 |
| Predictions of the economic gloom which would follow the Brexit vote seem to be wide of the mark, according to a new Guardian project tracking the state of play as Britain prepares to leave the European Union. | Predictions of the economic gloom which would follow the Brexit vote seem to be wide of the mark, according to a new Guardian project tracking the state of play as Britain prepares to leave the European Union. |
| As a reminder, the UK Treasury for one forecast dire consequences in the immediate wake of the vote: | As a reminder, the UK Treasury for one forecast dire consequences in the immediate wake of the vote: |
| @EdConwaySky The HM Treasury document is clear & specific. A vote to leave would cause...https://t.co/Mlk3W8dUbO pic.twitter.com/B3EfvYVzJW | @EdConwaySky The HM Treasury document is clear & specific. A vote to leave would cause...https://t.co/Mlk3W8dUbO pic.twitter.com/B3EfvYVzJW |
| Unveiling the new Guardian project, Katie Allen writes: | Unveiling the new Guardian project, Katie Allen writes: |
| Fears that Britain will slide into a post-referendum recession have been allayed after a Guardian analysis showed the latest news on the economy has confounded analysts’ gloomy expectations, with consumer spending strong, unemployment low and the housing market holding steady. | Fears that Britain will slide into a post-referendum recession have been allayed after a Guardian analysis showed the latest news on the economy has confounded analysts’ gloomy expectations, with consumer spending strong, unemployment low and the housing market holding steady. |
| The finding comes as a leading thinktank toned down its earlier dire warnings of economic turmoil for the UK and its neighbours in the event of a leave vote. The Paris-based Organisation for Economic Cooperation and Development (OECD) said prompt action by the Bank of England to cut interest rates had cushioned the blow from June’s Brexit vote but it still believes the UK will suffer a sharp slowdown next year amid heightened uncertainty. | The finding comes as a leading thinktank toned down its earlier dire warnings of economic turmoil for the UK and its neighbours in the event of a leave vote. The Paris-based Organisation for Economic Cooperation and Development (OECD) said prompt action by the Bank of England to cut interest rates had cushioned the blow from June’s Brexit vote but it still believes the UK will suffer a sharp slowdown next year amid heightened uncertainty. |
| Official figures on the state of the public finances, released on Wednesday, also showed little impact from the vote to leave the EU. Government borrowing was a touch higher than economists had expected in August, but was lower than a year ago in a boost to the chancellor, Philip Hammond, as he prepares to give his maiden autumn statement in November. | Official figures on the state of the public finances, released on Wednesday, also showed little impact from the vote to leave the EU. Government borrowing was a touch higher than economists had expected in August, but was lower than a year ago in a boost to the chancellor, Philip Hammond, as he prepares to give his maiden autumn statement in November. |
| Following the historic 23 June vote to leave the EU, analysts were quick to predict the UK economy would grind to a halt or even shrink. They warned businesses and households would stop spending because of job cuts, political uncertainty and a squeeze on living standards as the weak pound stoked inflation. | Following the historic 23 June vote to leave the EU, analysts were quick to predict the UK economy would grind to a halt or even shrink. They warned businesses and households would stop spending because of job cuts, political uncertainty and a squeeze on living standards as the weak pound stoked inflation. |
| But since the Bank stepped in with a package of measures to shore up the economy, much of the economic news has defied expectations and many analysts have toned down their post-referendum gloom. | But since the Bank stepped in with a package of measures to shore up the economy, much of the economic news has defied expectations and many analysts have toned down their post-referendum gloom. |
| Now the picture of early resilience is bolstered in the first snapshot of post-referendum Britain in a new Guardian project that will track the economy as the Brexit talks begin and progress, and as more data on the economy becomes available. | Now the picture of early resilience is bolstered in the first snapshot of post-referendum Britain in a new Guardian project that will track the economy as the Brexit talks begin and progress, and as more data on the economy becomes available. |
| The first report is here: | The first report is here: |
| 3.39pm BST | 3.39pm BST |
| 15:39 | 15:39 |
| Oil prices rise after inventory figures | Oil prices rise after inventory figures |
| US crude stocks fell unexpectedly last week as producers reduced their output, helping oil prices extend their early gains. | US crude stocks fell unexpectedly last week as producers reduced their output, helping oil prices extend their early gains. |
| Crude inventories dropped by 6.2m barrels, according to the Energy Information Administration, compared to expectations of an increase of 3.4m barrels. | Crude inventories dropped by 6.2m barrels, according to the Energy Information Administration, compared to expectations of an increase of 3.4m barrels. |
| Gasoline stocks fell by a larger than expected 3.2m barrels, with analysts forecasting a 567,000 decline according to Reuters. | Gasoline stocks fell by a larger than expected 3.2m barrels, with analysts forecasting a 567,000 decline according to Reuters. |
| But stocks of distillates - which include diesel and heating oil - increased by 2.2m barrels compared to forecasts of a 250,000 rise. | But stocks of distillates - which include diesel and heating oil - increased by 2.2m barrels compared to forecasts of a 250,000 rise. |
| Brent crude is now 1.35% higher at $46.50 a barrel while West Texas Intermediate - the US benchmark - is up 1.95% at $44.91. | Brent crude is now 1.35% higher at $46.50 a barrel while West Texas Intermediate - the US benchmark - is up 1.95% at $44.91. |
| 3.12pm BST | 3.12pm BST |
| 15:12 | 15:12 |
| Christopher Vecchio, currency analyst at DailyFX, said: | Christopher Vecchio, currency analyst at DailyFX, said: |
| Here we go again: What once was a much heralded and anticipated rate decision, the September FOMC meeting seems all but wrapped up at this point. The Federal Reserve will keep its main rate on hold at 0.25-0.50%, citing near-term, weak economic developments, yet insisting that enough progress has been made to warrant a rate hike at one of the upcoming meetings (hint: December, when the next SEPs are released). The key for the US Dollar today, however, is to what degree of confidence the FOMC has in the US economy, or simply, ‘how quickly does the Fed think it will be able to raise rates next?’ | Here we go again: What once was a much heralded and anticipated rate decision, the September FOMC meeting seems all but wrapped up at this point. The Federal Reserve will keep its main rate on hold at 0.25-0.50%, citing near-term, weak economic developments, yet insisting that enough progress has been made to warrant a rate hike at one of the upcoming meetings (hint: December, when the next SEPs are released). The key for the US Dollar today, however, is to what degree of confidence the FOMC has in the US economy, or simply, ‘how quickly does the Fed think it will be able to raise rates next?’ |
| ...In actuality, rate expectations are completely muted for today and are sitting on the fence for 2016. | ...In actuality, rate expectations are completely muted for today and are sitting on the fence for 2016. |
| This is the main source of risk for markets today. Should the FOMC choose to be headstrong and tear down conventional wisdom - a small possibility with two prime dealers coming out and calling for a rate hike - global markets will be shocked. But assuming the Fed plays it safe as it usually does, a lack of a rate hike may not hurt the US Dollar significantly. By suggesting that a rate hike is still “on the table” in the near-term, and by laying out an interest rate glide path for next year calling for multiple rate hikes, then the Fed could help insulate the US dollar, plain and simple. It’s starting to feel like a September-December 2015 redux. | This is the main source of risk for markets today. Should the FOMC choose to be headstrong and tear down conventional wisdom - a small possibility with two prime dealers coming out and calling for a rate hike - global markets will be shocked. But assuming the Fed plays it safe as it usually does, a lack of a rate hike may not hurt the US Dollar significantly. By suggesting that a rate hike is still “on the table” in the near-term, and by laying out an interest rate glide path for next year calling for multiple rate hikes, then the Fed could help insulate the US dollar, plain and simple. It’s starting to feel like a September-December 2015 redux. |
| 2.53pm BST | 2.53pm BST |
| 14:53 | 14:53 |
| So what are the chances of a US rate rise? | So what are the chances of a US rate rise? |
| Every time the US FOMC has hiked rates in the past 20 years, the market was pricing in >70% probability pic.twitter.com/Sm3NIxhM2E | Every time the US FOMC has hiked rates in the past 20 years, the market was pricing in >70% probability pic.twitter.com/Sm3NIxhM2E |
| 2.46pm BST | 2.46pm BST |
| 14:46 | 14:46 |
| Wall Street opens higher | Wall Street opens higher |
| Ahead of the Federal Reserve interest rate decision, US markets are moving higher. Most investors expect the Fed to leave rates on hold, but this is by no means guaranteed. | Ahead of the Federal Reserve interest rate decision, US markets are moving higher. Most investors expect the Fed to leave rates on hold, but this is by no means guaranteed. |
| The Dow Jones Industrial Average is currently up 76 points or 0.4% while the S&P 500 opened 0.36% higher and the Nasdaq composite was up 0.4% initially. | The Dow Jones Industrial Average is currently up 76 points or 0.4% while the S&P 500 opened 0.36% higher and the Nasdaq composite was up 0.4% initially. |
| European markets are holding onto their gains - albeit off their best levels - with Germany’s Dax and France’s Cac both climbing 0.6%. But the FTSE 100 is up just 0.15% or 10 points. Connor Campbell, financial analyst at Spreadex, said: | European markets are holding onto their gains - albeit off their best levels - with Germany’s Dax and France’s Cac both climbing 0.6%. But the FTSE 100 is up just 0.15% or 10 points. Connor Campbell, financial analyst at Spreadex, said: |
| The FTSE has seen its gains roughly halve as the day has gone on, the early Bank of Japan stimulus excitement gradually waning as more and more analysts voiced their scepticism about the effectiveness of the measures Kuroda and co. announced this morning. The same thing has happened in the Eurozone, the DAX and CAC now both up around half a percent having surged by as much as 1% after the bell. | The FTSE has seen its gains roughly halve as the day has gone on, the early Bank of Japan stimulus excitement gradually waning as more and more analysts voiced their scepticism about the effectiveness of the measures Kuroda and co. announced this morning. The same thing has happened in the Eurozone, the DAX and CAC now both up around half a percent having surged by as much as 1% after the bell. |
| Updated | Updated |
| at 3.26pm BST | at 3.26pm BST |
| 2.30pm BST | 2.30pm BST |
| 14:30 | 14:30 |
| Summers: 10 good reasons not to raise US interest rates today | Summers: 10 good reasons not to raise US interest rates today |
| Larry Summers, the former US Treasury secretary, has fired an epic Tweetstorm towards the Federal Reserve, explaining why they shouldn’t hike. | Larry Summers, the former US Treasury secretary, has fired an epic Tweetstorm towards the Federal Reserve, explaining why they shouldn’t hike. |
| He argues that the US labour market is far from overheating, and that the Fed should be comfortable with inflation running over its 2% target for some time, following the current underrun (inflation is currently 1.1%). | He argues that the US labour market is far from overheating, and that the Fed should be comfortable with inflation running over its 2% target for some time, following the current underrun (inflation is currently 1.1%). |
| He also fears that a surprise hike tonight might unbalance the economy at a crucial moment, sending the dollar too high, and creating a mess the Fed can’t fix.... | He also fears that a surprise hike tonight might unbalance the economy at a crucial moment, sending the dollar too high, and creating a mess the Fed can’t fix.... |
| There are many reasons, each of which would be reason enough alone, for the Fed not to raise rates today 1/11 | There are many reasons, each of which would be reason enough alone, for the Fed not to raise rates today 1/11 |
| The Fed should not raise rate because total hours worked in US are flat to down over last 6 months 2/11 | The Fed should not raise rate because total hours worked in US are flat to down over last 6 months 2/11 |
| The Fed should not raise rates because inflation expectations are falling not rising 3/11 | The Fed should not raise rates because inflation expectations are falling not rising 3/11 |
| The Fed should not raise rates because in the 8 year of recovery it should be targeting inflation above 2% so inflation averages 2%. 4/11 | The Fed should not raise rates because in the 8 year of recovery it should be targeting inflation above 2% so inflation averages 2%. 4/11 |
| The Fed should not raise rates because it lacks the tools to respond if a downturn comes 5/11 | The Fed should not raise rates because it lacks the tools to respond if a downturn comes 5/11 |
| The Fed should not raise rates because it will come as a shock at a fragile moment 6/11 | The Fed should not raise rates because it will come as a shock at a fragile moment 6/11 |
| Fed should not raise rates b/ the economy is sign. weaker & inflation expectations weaker than when it erred (judged expost) last Dec. 7/11 | Fed should not raise rates b/ the economy is sign. weaker & inflation expectations weaker than when it erred (judged expost) last Dec. 7/11 |
| Fed should get off the idea credibility requires raising rates now, Dec or at any point b4 inflation expectations are accelerating. 8/11 | Fed should get off the idea credibility requires raising rates now, Dec or at any point b4 inflation expectations are accelerating. 8/11 |
| There are much better ways than rate increases for dealing with any concerns about bubbles 9/11 | There are much better ways than rate increases for dealing with any concerns about bubbles 9/11 |
| The Fed should take on board that with the economy so slow over the last 3 quarters rates may not be below neutral now. 10/11 | The Fed should take on board that with the economy so slow over the last 3 quarters rates may not be below neutral now. 10/11 |
| Tightening now will induce artificial dollar strength, which is hardly a good thing given the magnitude of protectionist pressures 11/11 | Tightening now will induce artificial dollar strength, which is hardly a good thing given the magnitude of protectionist pressures 11/11 |