Yesterday evening was the week’s most anticipated event by far, with the FOMC interest rate decision and Janet Yellen’s speech taking centre stage. Markets keenly anticipated if not a hike, at least a hawkish tone, and an indication to a December raise.
During the event, the Fed were heavily divided. They left rates unchanged, but said that the case for a rate increase ‘had strengthened’. Of the 10 rate-setters, three voted for an immediate increase. The overall tone was reasonably positive with Fed Chair Yellen stating that the committee was ‘generally pleased with how the US economy was doing’. However, they pointed to labour data which was slightly off, as well as inflation missing its 2 percent target, as reasons to keep rates on hold. As a result, market reaction was fairly muted, with US stocks rising lightly, and the Dollar moving a little over the course of the events.
Yesterday also saw the Bank of Japan state that they are going to overhaul their current monetary policy strategy as they look for new ways to re-invigorate the economy. The BoJ have set a cap of 10-year bond yields, and have promised to overshoot its 2% inflation target as it seeks to emerge from the mire of low-inflation.
The National Association of Realtors will release new data on Existing-Home Sales, which dropped 3.2% in July as inventory remained tight and prices stayed high. Economists expect that the sales figure partially rebounded in August, rising 1.7%. ECB President Mario Draghi, due to speak in Frankfurt, will be at the European Systemic Risk Board. Whilst he isn’t expected to comment on ECB policy directly, if he is drawn into comments, we can expect to see Euro movement.