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Markets await Federal Reserve interest rate decision – business live
Federal Reserve leaves US interest rates on hold – live updates
(35 minutes later)
7.34pm BST
19:34
Recent employment data shows that more people are coming back to the labour market looking for jobs, says Yellen. That’s a very encouraging sign - but also means there is still some slack to mop up.
7.32pm BST
19:32
Yellen press conference begins
Janet Yellen is giving a press conference right now! It’s being streamed live here.
The Fed chair confirms that the Fed believes the economy has strengthened, but left rates on hold.
She says household spending has driven growth up, but business investment remains “soft”.
7.28pm BST
19:28
Some snap reaction and analysis:
A divided Federal Reserve left rates unchanged "for the time being." 3 officials dissented in favor of higher rates. https://t.co/U4H58QnQFa
Yellen's presser sure to see serious verbal gymnastics. Keep market honest, December on the table, yet maintain Fed flexibility.
I don't see anythimg hawkish in this #fed
Fed explicitly acknowledged of reality by reduction in the long term growth path to 1.8 percent. I'm at 1.5% with downside risk of 1%
Median Fed official's estimate for longer-run trend GDP growth has slipped below 2% for the first time (now 1.8%)
7.26pm BST
19:26
The Fed statement: the key points
Alhough the Federal Reserve resisted hiking rates, the US central bank does believe that the economic conditions are improving.
Today’s statement suggests that the economy is in decent-enough shape, but inflation is still too low to justify higher borrowing costs.
The Fed says: (I’ve bolded-up some parts)
Information received since the Federal Open Market Committee met in July indicates that the labor market has continued to strengthen and growth of economic activity has picked up from the modest pace seen in the first half of this year. Although the unemployment rate is little changed in recent months, job gains have been solid, on average. Household spending has been growing strongly but business fixed investment has remained soft. Inflation has continued to run below the Committee’s 2 percent longer-run objective, partly reflecting earlier declines in energy prices and in prices of non-energy imports. Market-based measures of inflation compensation remain low; most survey-based measures of longer-term inflation expectations are little changed, on balance, in recent months.
But...
Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee expects that, with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace and labor market conditions will strengthen somewhat further. Inflation is expected to remain low in the near term, in part because of earlier declines in energy prices, but to rise to 2 percent over the medium term as the transitory effects of past declines in energy and import prices dissipate and the labor market strengthens further. Near-term risks to the economic outlook appear roughly balanced. The Committee continues to closely monitor inflation indicators and global economic and financial developments.
7.19pm BST
19:19
Wall Street has taken today’s decision in its stride - shares are a little higher, and the dollar has dipped a little. But it’s nothing serious.
Fed reaction. pic.twitter.com/mTC9EgyxSe
7.17pm BST
19:17
The Federal Reserve has also cut its interest rate expectations - now only expecting 1 rate hike this year (down from two in June).
The Fed also expects rates to rise more gradually in 2017 and 2018, and cut its longer-run interest rate forecast to 2.9 percent from 3.0 percent.
But yet....the Fed said the near-term risks for the economic outlook “appear roughly balanced.”
This new dot chart shows how the Fed’s policymakers expect rates to change of the next few years:
7.07pm BST
19:07
The Fed has dropped a clear hint that it is close to raising interest rates - just not today.
In today’s statement, it says:
“The case for an increase in the federal funds rate has strengthened”.
And 14 of the Fed’s 17 policymakers expect at least one hike by the end of this year.
7.03pm BST
19:03
Three policymakers wanted to hike
Today’s decision isn’t unanimous! Three Federal Reserve policymakers voted to raise borrowing costs today.
They are: Kansas City Fed President Esther George, Cleveland Fed President Loretta Mester and Boston Fed President Eric Rosengren.
*FED KEEPS RATES UNCHANGED AS THREE OFFICIALS DISSENT FOR HIKE
Updated
at 7.07pm BST
7.00pm BST
19:00
US RATE DECISION
BREAKING: The Federal Reserve has left interest rates unchanged at 0.25% to 0.5%.
More to follow.....
6.56pm BST
6.56pm BST
18:56
18:56
#hawkish hold or #dovish hike? We will find out soon! #Fed #Yellen
#hawkish hold or #dovish hike? We will find out soon! #Fed #Yellen
6.54pm BST
6.54pm BST
18:54
18:54
OK, nearly time for the most eagerly anticipated Central Bank decision since the Bank of Japan shook up its stimulus programme this morning :)
OK, nearly time for the most eagerly anticipated Central Bank decision since the Bank of Japan shook up its stimulus programme this morning :)
We get the decision at the top of the hour, along with new economic forecasts.
We get the decision at the top of the hour, along with new economic forecasts.
Then 30 minutes later, Fed chair Janet Yellen holds a press conference.
Then 30 minutes later, Fed chair Janet Yellen holds a press conference.
6.46pm BST
6.46pm BST
18:46
18:46
It’s been a nervous few hours on the New York stock market.
It’s been a nervous few hours on the New York stock market.
The Dow opened higher, then slid into negative territory as Fed jitters gnawed away at traders. And now it’s back where it started, up just 0.07%.
The Dow opened higher, then slid into negative territory as Fed jitters gnawed away at traders. And now it’s back where it started, up just 0.07%.
15 mins #Fed pic.twitter.com/k6LAY5s5BR
15 mins #Fed pic.twitter.com/k6LAY5s5BR
Updated
Updated
at 6.46pm BST
at 6.46pm BST
6.35pm BST
6.35pm BST
18:35
18:35
This chart also shows how investors are positioning themselves for rates to be higher in three month’s time.
This chart also shows how investors are positioning themselves for rates to be higher in three month’s time.
Here comes Fed tightening? Excluding Memorial Day weekend, one-month OIS three months forward is highest since 2008 pic.twitter.com/pT0grECyNF
Here comes Fed tightening? Excluding Memorial Day weekend, one-month OIS three months forward is highest since 2008 pic.twitter.com/pT0grECyNF
6.35pm BST
6.35pm BST
18:35
18:35
Anticipation is growing....
Anticipation is growing....
Getting excited about the Fed now. pic.twitter.com/a3pRrFaQAD
Getting excited about the Fed now. pic.twitter.com/a3pRrFaQAD
6.30pm BST
6.30pm BST
18:30
18:30
Just 30 minutes to go! And the markets reckon there’s less than a one-in-four chance that the Fed will raise interest rates.
Just 30 minutes to go! And the markets reckon there’s less than a one-in-four chance that the Fed will raise interest rates.
Wall Street isnt’ always right, of course. So you can expect some wild movements if Janet Yellen produces a surprise at 2pm Eastern Time (7pm in the UK).
Wall Street isnt’ always right, of course. So you can expect some wild movements if Janet Yellen produces a surprise at 2pm Eastern Time (7pm in the UK).
This chart shows how a September hike is a 22% chance, while rising to 31% in November, and then 59% for December.
This chart shows how a September hike is a 22% chance, while rising to 31% in November, and then 59% for December.
Updated
Updated
at 6.47pm BST
at 6.47pm BST
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
17:21
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:
On Wall Street, the Dow Jones Industrial Average is currently pretty flat, up just 2 points.
4.53pm BST
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:
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.
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%.
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
at 4.55pm BST
4.14pm BST
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.
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
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.
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.
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.
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:
3.39pm BST
15:39
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.
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.
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.
3.12pm BST
15:12
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?’
...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.
2.53pm BST
14:53
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
2.46pm BST
14:46
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.
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:
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
at 3.26pm BST
2.30pm BST
14:30
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.
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....
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 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 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
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
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
Tightening now will induce artificial dollar strength, which is hardly a good thing given the magnitude of protectionist pressures 11/11
