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US Federal Reserve interest rate decision – business live | |
(35 minutes later) | |
Brace for impact@federalreserve | |
With just a few minutes to go, the Dow is up 1.2% or 285 points at 23,960..... | |
Stocks, bonds and the dollar could all be volatile today, when the Fed decision hits the wires. | |
John Hardy of Saxo Bank says the stakes are high for chairman Powell and colleagues... | |
White-knuckle equity market declines, a hedge fund legend and President Trump are all begging Fed chair Jay Powell to cease and desist with further rate tightening ahead of today’s pivotal FOMC. | |
Will he pause or plough ahead? | |
We find out in just 10 minutes.... | |
The Fed may well deliver a ‘dovish hike’ today -- raising borrowing costs, while sounding less optimistic that rates will keep rising. | |
Fiona Cincotta of City Index explains: | |
We are expecting a dovish hike from the Fed, with the well-used phrase “gradual further hikes” to be dropped from the statement. Furthermore, we expect the Fed to trim is forecast of further hikes. The Fed will have to strike a balance between addressing the current strength in the economy (GDP 3.5% yoy Q3) and taking onboard signs of a slowing global economy. | |
Additionally, they will need to do this in such a way that it doesn’t alarm financial markets. The fact that US equity indices are moving convincingly higher again today shows that the traders are expecting the Fed’s message to soothe volatile markets. | |
It’s nearly time for one of the final economic events of 2018 -- the conclusions of the December meeting of the US Federal Reserve. | |
Despite recent market turbulence, most financial experts expect the Fed to raise US interest rates today, by a quarter of one percent. | |
That would lift the headline cost of borrowing up to 2.25%-2.5%, the highest since early 2008. It would also be the 9th interest rate increase since the Fed started normalising policy in 2016. | |
But that’s not the only thing to watch out for. The Fed will release new economic predictions, which may show less optimism about growth prospects. | |
That will be accompanied by a new dot plot, showing where policymakers expect interest rate to be over the next couple of years. | |
Those dots will be closely scrutinised, to see if the Fed is signalling a pause in its hiking cycle. | |
If it doesn’t, we can expect Donald Trump to be vocal in his criticism of the Fed. The president has already urged chairman Jerome Powell and colleagues not to hike, meaning the pressure is on tonight... | |
European stock markets have closed higher tonight. | European stock markets have closed higher tonight. |
The FTSE 100 gained 64 points, or almost 1%, to 6,765, recovering from its lowest close in two years on Tuesday. | The FTSE 100 gained 64 points, or almost 1%, to 6,765, recovering from its lowest close in two years on Tuesday. |
GlaxoSmithKline led the rally, ending the session almost 4% higher after announcing its consumer healthcare tie-up with Pfizer. | GlaxoSmithKline led the rally, ending the session almost 4% higher after announcing its consumer healthcare tie-up with Pfizer. |
Tim Gamble, Global Head of Pharma Consulting at the Economist Intelligence Unit, says: | Tim Gamble, Global Head of Pharma Consulting at the Economist Intelligence Unit, says: |
What this deal means is a concerted pivot towards innovation and decoupling of the consumer healthcare business. The hook up with 23andMe, appointment of Hal Barron to R&D gives insight into the innovation strategy pursued by Chief Executive Emma Walmsey. | What this deal means is a concerted pivot towards innovation and decoupling of the consumer healthcare business. The hook up with 23andMe, appointment of Hal Barron to R&D gives insight into the innovation strategy pursued by Chief Executive Emma Walmsey. |
This places greater strain on the Pharma division - but it’s external regulatory constraints that may yet place the drag on Walmsey’s ambitions.” | This places greater strain on the Pharma division - but it’s external regulatory constraints that may yet place the drag on Walmsey’s ambitions.” |
GSK plans break-up after £10bn Pfizer deal | GSK plans break-up after £10bn Pfizer deal |
Italy was the stand-out performer today, gaining 1.6% after reaching a compromise with the European commission over its 2019 budget. | Italy was the stand-out performer today, gaining 1.6% after reaching a compromise with the European commission over its 2019 budget. |
Italy avoids EU sanctions after reaching 2019 budget agreement | Italy avoids EU sanctions after reaching 2019 budget agreement |
The German DAX gained 0.4%, while France’s CAC rose by 0.6%. | The German DAX gained 0.4%, while France’s CAC rose by 0.6%. |
With just over an hour to go until the US interest rate decision, stocks are up on Wall Street too. | With just over an hour to go until the US interest rate decision, stocks are up on Wall Street too. |
The Dow Jones industrial average is up 275 points at 23,950, a gain of 1.1%. | The Dow Jones industrial average is up 275 points at 23,950, a gain of 1.1%. |
But that could unravel if the Fed is more hawkish than expected tonight.... | But that could unravel if the Fed is more hawkish than expected tonight.... |
Back in London, cab hire company Uber has lost another legal attempt to prevent its UK drivers being classed as workers, rater than self-employed. | Back in London, cab hire company Uber has lost another legal attempt to prevent its UK drivers being classed as workers, rater than self-employed. |
The Court of Appeal has has upheld an earlier ruling, in 2016, that drivers were effectively employed by Uber, and thus entitled to holiday pay and the minimum wage. | The Court of Appeal has has upheld an earlier ruling, in 2016, that drivers were effectively employed by Uber, and thus entitled to holiday pay and the minimum wage. |
TUC General Secretary Frances O’Grady says it’s an important decision: | TUC General Secretary Frances O’Grady says it’s an important decision: |
“No company is above the law. Uber must play by the rules and treat its staff properly. | “No company is above the law. Uber must play by the rules and treat its staff properly. |
“Today’s ruling should be a warning to other gig economy employers. If you play fast and loose with workers’ rights, unions will expose you and hold you to account. | “Today’s ruling should be a warning to other gig economy employers. If you play fast and loose with workers’ rights, unions will expose you and hold you to account. |
Jonathan Chamberlain, partner at law firm Gowling WLG, says other companies should take note: | Jonathan Chamberlain, partner at law firm Gowling WLG, says other companies should take note: |
Yet another court confirms that the more a brand seeks to control the activities of the people that deliver that brand’s services to the public, the less likely those people are to be self-employed. | Yet another court confirms that the more a brand seeks to control the activities of the people that deliver that brand’s services to the public, the less likely those people are to be self-employed. |
The law will probably always remain uncertain in this area, despite the governments promise of reform, but the direction of travel is clear. | The law will probably always remain uncertain in this area, despite the governments promise of reform, but the direction of travel is clear. |
I expect the Supreme Court to uphold this judgement but we shall see.” | I expect the Supreme Court to uphold this judgement but we shall see.” |
Wall Street is open, but traders are keeping their powder dry, ahead of the US interest rate decision.... | Wall Street is open, but traders are keeping their powder dry, ahead of the US interest rate decision.... |
U.S. stocks open largely unchanged ahead of today's Fed decision https://t.co/tJEO0jbC02 pic.twitter.com/Pg8jGyvmoX | U.S. stocks open largely unchanged ahead of today's Fed decision https://t.co/tJEO0jbC02 pic.twitter.com/Pg8jGyvmoX |
A quick recap. | A quick recap. |
UK inflation has fallen to its lowest level in 20 months. Consumer prices rose by 2.3% in the year to November, thanks to cheaper petrol and clothes. | UK inflation has fallen to its lowest level in 20 months. Consumer prices rose by 2.3% in the year to November, thanks to cheaper petrol and clothes. |
Economists believe that inflation will keep slowing in 2019, helping to keep real wages in positive territory. | Economists believe that inflation will keep slowing in 2019, helping to keep real wages in positive territory. |
UK house price inflation has also slowed, to its lowest level in over five years. Price in London fell by 1.7%, as Brexit anxiety weighs on demand. | UK house price inflation has also slowed, to its lowest level in over five years. Price in London fell by 1.7%, as Brexit anxiety weighs on demand. |
The Italian stock market is surging after Rome and the EU reached agreement over its budget plans for next year. | The Italian stock market is surging after Rome and the EU reached agreement over its budget plans for next year. |
Investors are nervously awaiting the Federal Reserve’s interest rate decision, at 7pm GMT. The Fed is likely to raise borrowing costs, but could also lower its forecasts for future rate hikes. | Investors are nervously awaiting the Federal Reserve’s interest rate decision, at 7pm GMT. The Fed is likely to raise borrowing costs, but could also lower its forecasts for future rate hikes. |
Craig Erlam of trading firm OANDA says the Fed could surprise the markets by holding borrowing costs -- something which president Trump has been demanding for months. | Craig Erlam of trading firm OANDA says the Fed could surprise the markets by holding borrowing costs -- something which president Trump has been demanding for months. |
A dovish hike is widely expected today and increases next year reduced to one or two, although I wonder whether they may hold off and surprise the markets. I may not agree with Trump’s constant Fed bashing but he may have a point on this occasion. With the global economy facing lower growth in 2019, including the US, inflation in check and US stocks in correction territory, it may not be the best time to be raising rates. | A dovish hike is widely expected today and increases next year reduced to one or two, although I wonder whether they may hold off and surprise the markets. I may not agree with Trump’s constant Fed bashing but he may have a point on this occasion. With the global economy facing lower growth in 2019, including the US, inflation in check and US stocks in correction territory, it may not be the best time to be raising rates. |
I don’t think anyone would blame the Fed for taking a break this month and lining up two or three next year, depending on how the economy performs. It may even provide comfort for investors and be the catalyst for a late Santa surge, bringing the year to an end on a more positive not. Of course, this will then naturally attract criticism that the central bank is bowing to pressure from the White House but being independent doesn’t always mean going against the wishes of Trump. | I don’t think anyone would blame the Fed for taking a break this month and lining up two or three next year, depending on how the economy performs. It may even provide comfort for investors and be the catalyst for a late Santa surge, bringing the year to an end on a more positive not. Of course, this will then naturally attract criticism that the central bank is bowing to pressure from the White House but being independent doesn’t always mean going against the wishes of Trump. |