Dovish FOMC fails to score a try

Yesterday’s markets

18th September 2015

  • BoJ Gov Kuroda Speaks
  • CHF Libor Rate: -0.75%
  • SNB Monetary Policy Assessment
  • UK Retail Sales m/m: 0.2%
  • US Building Permits: 1.17M
  • US Unemployment Claims: 264K
  • US Philly Fed Manufacturing Index: -6.0
  • US FOMC Economic Projections
  • US FOMC Statement
  • US Federal Funds Rate: <0.25%
  • US FOMC Press Conference

After months of anticipation, the FOMC disappoints the market and kept rates on hold. The FOMC decided to keep rates on hold due to worries about the global economy, financial market volatility and sluggish inflation at home, but left open the possibility of a modest policy tightening later this year. "The outlook abroad appears to have become less certain," Yellen told a news conference. In deciding when to hike rates, the Fed repeated it wanted to see "some further improvement in the labor market," and be "reasonably confident" that inflation will increase. Many are now citing December as the projected date for “lift off”.

Economist are highlighting that Yellen may well be emulating her predecessor’s policy playbook. Back in 2013 then Fed Chairman Ben S. Bernanke debated whether to start scaling back bond purchases. Citing uncertainties to the outlook, Bernanke put off a move to begin tapering in September before deciding to go ahead in December. Just like today, much of the Fed’s initial reservations about acting in 2013 centered on developments in emerging markets. Until then, data will continue to be monitored for further clues. Markets may get more clues to Yellen’s thinking when she speaks on 24/09 in Amherst, Massachusetts.

Meanwhile, UK retail sales added to signs of a softer Q3. British retail sales edged up in August but the sluggish pace added to signs that overall economic growth slowed. Retail sales volumes rose 0.2 percent on the month, as expected. Sales of school uniforms before the return to school helped offset a fall in food sales. Hopefully the kick off of the rugby world cup will boost consumer spending. This will put the Bank of England under no pressure to speed up its debate on when to raise interest rates given the lackluster run data of late. 

Today’s markets

17th September 2015

  • EUR Current Account
  • BoE Quarterly Bulletin
  • UK MPC Member Haldane Speaks
  • CAD Core CPI m/m
  • CAD CPI m/m
  • US CB Leading Index m/m

Today, the market will continue to digest the commentary from yesterday’s FOMC meeting