Things are
not looking very promising for the prospects of a Federal Reserve rate rise
announcement any time soon. The two-day October Federal Open Market Committee (FOMC)
meeting terminates later today (Wed Oct 28th 2015), when the
interest rate decision will be announced. In reality, the markets have not been
pricing in a rate rise on this occasion, but a number of reports that came out yesterday,
taken in conjunction with the recent clear signals from the European Central
Bank (ECB) about further reductions in interest rates, both core borrowing and
deposit, as well as further Quantitative Easing (QE) in the Eurozone, must
surely push back such a development even from the Fed December meeting, creating
the impression that there will be not be a firming of US monetary policy this
year.
What effects
do UK GDP and Eurozone easing have on US interest rate decisions, we hear you
ask? The answer is that we live in a global economy, and all such decisions in
the major jurisdictions are made with one eye to the main trading partners. If
the world economy is flat, then the US authorities will not want to increase
rates too quickly for fear that to do so will result in the importation of even
lower inflation than exists stateside already. In addition, a strengthening US
dollar is not good for exports. The Fed will want to have some expectation that
other monetary authorities will increase rates not too long after it does.
UK GDP, US Durable Goods, US Consumer
Confidence all down
The reports
that were out yesterday and which disappointed were UK Gross Domestic Product
(2.3% as against 2.4% expected), US Durable Goods (down 1.2% in September and with
revisions of the August figures that bring them to -3%) and the US Consumer
Confidence Index (97.6 as against 102.9 expected).
It will be
interesting indeed to hear what the Fed has to say in its monetary policy
statement later today, even if this one is not due to be followed by a press
conference.
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