US stock market hits one-year low after Fed defies Trump with rate hike - as it happened
Dow hits 2018 low after central bankers increase rates despite pressure from Trump to leave them unchanged
- Latest: Markets in the red as Powell flags future hikes
- Powell says Trump won't affect the Fed
- Fed press conference - highlights start here
- What the experts say
- Full story: Fed raises interest rates
- Two hikes expected in 2019, down from three before
10.05pm GMT
We're still waiting for Donald Trump to react to the Fed's rate hike, despite his repeated warnings.
All is quiet on @realDonaldTrump though.
9.56pm GMT
Here's Geoffery Yu, Head of the UK Investment Office at UBS Wealth Management, on the sell-off:
"Despite the Fed's initial announcement to hike interest rates being broadly in line with market expectation, there was hope for it to be slightly more accommodative. Markets have subsequently struggled, following Chairman Powell's press conference.
Powell's comments that "policy does not currently need to be restrictive" has been interpreted that the Fed is not looking at an immediate pause.
9.54pm GMT
Here's an unwelcome record for Jay Powell - he just triggered the biggest sell-off after a rate hike in almost 25 years.
The S&P 500 closed 1.5% lower on Wednesday in a volatile session that ranked as its biggest one-day drop following a Federal Reserve rate rise since 1994. https://t.co/PCTk1l5n4n pic.twitter.com/Hjra3JcHPA
9.47pm GMT
Capital Economics agrees that the Federal Reserve could have been rather more dovish.
Here's their take:
The Fed hiked the fed funds target range by 25bp today, to between 2.25% and 2.50%, as most still expected, but tempered the move by slightly revising down Fed officials' projections for additional rate increases in 2019 and beyond.
Still, with the vote unanimous and the median rate projection for end-2019 revised down by only 20bp, this was hardly the "dovish hike" that some were anticipating.
9.28pm GMT
Key point: Shares aren't falling because the Fed raised interest rates. That was priced in.
Instead, they're falling because chair Jerome Powell indicated that they'll keep hiking if the data justifies it......despite signs of a global slowdown.
#Fed was judged as being "less-dovish-than-expected". Markets were relatively settled until #Powell's press conference. Then the selling set-in. Wall Street off; Dow hits YTD low. Markets believe Fed-hikes will go ahead even as global growth sputters.
9.25pm GMT
It's early days, but it looks like European stock markets are going to fall tomorrow.
Britain's FTSE 100 is currently expected to fall around 85 points, according to the futures market at IG, near to a two-year low [reminder, it gained 64 points today]
Looks like Europe going to selloff tomorrow, FTSE futures down big
9.12pm GMT
Newsflash: The US stock market has closed at its lowest level in over a year, following today's interest rate hike.
The Dow Jones industrial average shed 1.5%, or 351 points, to end at 23,323 points - the lowest point since November 2017.
9.00pm GMT
My colleague Dominic Rushe has covered the Fed's rate hike, and chair Powell's press conference, here:
Related: Federal Reserve raises interest rates despite pressure from Trump
8.43pm GMT
I said earlier that this was a dovish hike.
Actually, it looks more like a dovish-ish one.
The Federal Open Market Committee (FOMC), as expected, raised rates 25bps, with their projections implying one fewer rate rise next year. However, the signals sent in the statement and forecasts weren't as dovish as we had expected, e.g. only making a small adjustment to their language around "further gradual" hikes (by adding the word "some"). A more cautious signal from the Fed could have been justified (and would have been welcomed by equity markets) given the tightening in financial conditions and weaker global growth backdrop.
However, the domestic economic data has looked strong enough to suggest that we aren't at the peak of the rate cycle quite yet.
8.29pm GMT
Bob Baur, chief global economist at Principal Global Investors, thinks the Fed is being too relaxed about recent market volatility:
The Fed raised rates as expected, but I think the Fed may be underestimating other factors at play. Trade has been making headlines, but I think a gradual tightening of monetary policy has been the driving force behind recent market volatility. With corporate borrowing and spending still high, and the Fed continuing to reduce its balance sheet, I'd expect volatility to remain if this tightening continues.
"I still think there is a disconnect between Main Street and Wall Street. A general consensus is that a market downturn signals an upcoming recession, but most underlying data points are still healthy and the economy is robust. Just the other day we saw data signalling strong consumer spending, which is one of a few points that tell me the real economy is doing well.
8.27pm GMT
Michael McDonough of Bloomberg has pinpointed the moment when US stocks got a chill from Powell....
S&P 500 Intraday & What Powell Said: pic.twitter.com/Zd5fVuwCI8
8.17pm GMT
Finally, a question on Brexit.
Jerome Powell thinks the US financial system is well-prepared for whatever happens, whether the UK leaves the US with a transition deal, or without one.
8.15pm GMT
Jerome Powell reiterates that the Fed expects solid growth in 2019, with declining unemployment.
That sounds like conditions that would justify further rate hikes next year, which is why shares are diving in New York.
Equity markets plunge following Fed rate hike:
US Indices update:#DOW 23329.38 -1.46%#SPX 2507.43 -1.52%#NDX 6350.61 -2.17%#VIX 25.78 +0.78%
8.14pm GMT
Q for @federalreserve chairman - how big an impact is he expecting Europe's economy to be on the US next 2 years- characterize the situation in the UK, France & Italy now . @MorningsMaria @FoxBusiness
8.10pm GMT
Chair Powell is having quite an impact....
To my earlier point, the markets aren't loving this... pic.twitter.com/pBbJCGu12n
8.07pm GMT
The sell-off is gathering pace!
BREAKING: Dow slides more than 400 points as Fed chair Powell delivers news conference after hiking rates; index was earlier up more than 380 pointshttps://t.co/SPz0hnyZMd pic.twitter.com/ue5EJSKkRT
8.06pm GMT
Next year, the Federal Reserve will hold a press conference after every meeting (rather than every other meeting).
That will be a "big gain" for communication, Jerome Powell says.
8.03pm GMT
Q: Donald Trump wants you to 'feel the markets', so what feelings are you getting?
Powell plays down the idea that he should be fixated on the stock exchange.
8.01pm GMT
Stocks turn deeper into the red. Dow now down 250 points as Powell not as dovish as expected. pic.twitter.com/sm6aZjcowM
8.01pm GMT
If you speak to American companies, you hear that they're worried about growth prospects, Jerome Powell says.
7.59pm GMT
Stocks are now falling sharply in New York.
The Dow is now down 1%, or 256 points, having been UP 300 points before the Fed's announcement.
7.57pm GMT
Q: Are you worried about Donald Trump's statements, and tweets, about the Fed?
I'm not worried, Powell replies; he knows everyone at the Fed will keep on doing their job.
7.55pm GMT
Q: How can you tell if the Fed has become a drag on the economy?
Powell says the Fed expects decent growth in the US economy next year, of between 2% and 2.5%. So it'll be watching the data closely to see if that plays out.
7.54pm GMT
Fed Chair Jerome Powell says "political considerations" have played no role in Federal Reserve policy https://t.co/2t6GGXtPJy pic.twitter.com/jbSYBSwOpL
7.49pm GMT
Q: How did the tightening in financial conditions, trade tensions, and criticism from Donald Trump affect today's decision?
Powell says the Fed took financial conditions into account, and will be watching the situation.
7.45pm GMT
There is a "fairly high degree of uncertainty over the path and destination of any further interest rate increases" Powell reiterates.
Translation: Those two hikes expected in 2019 are NOT set in concrete.
7.43pm GMT
Onto questions, starting with one about recent softening in US inflation data.
Chair Powell says this gives the Fed the flexibility to be patient.
7.42pm GMT
Jay Powell is now explaining that the Fed's future decisions aren't pre-determined.
Any future policy changes will depend on the data, he says.
Fed's #Powell going to some lengths to reiterate again and again that they will respond to data...there is not a plan...rate hikes are not predetermined
7.41pm GMT
The US dollar is bouncing around as Powell speaks....
7.38pm GMT
Powell says most of his colleagues expect the US economy to perform well in the coming year.
But they have cut their inflation projections, due to recent 'tightening in financial conditions' and slower growth abroad (the eurozone, for example, only grew by 0.2% in the last quarter, with Germany contracting)
7.35pm GMT
Jay Powell says that the Fed has lowered its forecast for economic growth next year. That's why it now expects two more interest rate hikes in 2019, down from 3 before.
7.34pm GMT
The Fed chair has arrived, to explain why US interest rates are being raised for the fourth time this year - and the 9th time since the financial crisis ended.
Jerome Powell says the US economy has been performing well over the last three months, with jobs being created, wages up, and inflation stable.
7.29pm GMT
A nice summary:
A "somewhat" dovish rate hike by the @FederalReserve :
The 25 bps increase in interest rates is accompanied by
one less signaled hike for next year (from a total of 3 to 2),
a 20 bps cut in the neutral rate estimate,
lower GDP projection
BUT still a path that overshoots neutral
7.29pm GMT
The S&P 500 index - a broader measure of US company values than the Dow - is now in the red, down 0.4% at 2,536 points.
That underlines that the Fed has disappointed Wall Street by not being more dovish.
7.27pm GMT
You can read the Fed's statement online, here. We'll hear from Jerome Powell shortly....
7.18pm GMT
Reaction to the US interest rate hike is pouring in.
Here's Nancy Curtin, chief investment officer at Close Brothers Asset Management:
"Despite Trump's misgivings the Fed was not going to be deterred from raising interest rates. In light of low unemployment and a robust economy, it was clear the central bank was led by the data in front of them.
The US economy has seen some momentum slow as the positive impact of fiscal policy wanes, which will affect future policy. The Fed will be wary that upwards pressure on prices is growing from a tight labour market, higher wages and Trump's trade war. As we move into 2019, the Fed will take a flexible pragmatic approach, dependent on the economic data."
"It seems like the new year could equal new monetary policy for Mr Powell.....
We expect that the Fed will likely continue to raise short-term interest rates in 2019, but at a slower pace than in the past with one to two hikes, and may pause or end rate hikes by mid-2019, if the yield curve flattens and inflation remains tame. We also expect the dollar to stay firm until there is evidence that the Fed is done tightening and global growth picks up. Market volatility is a theme that is likely to persist in 2019. After a decade of unprecedented liquidity provision, liquidity is draining out of the system as the Fed and other central banks move toward tighter monetary policy.
In a nod to financial market volatility and concerns of slowing global economic growth, the Fed inserted a comment into their statement about monitoring 'global economic and financial developments' and assessing 'their implications for economic growth
No Powell put on US equities as yet: @federalreserve raised rates to 2.25%-2.5% and still expects 'some gradual increases ' although median FOMC expectation now lower, with 2 rate rises in 2019 and one more in 2020, to 3.25%-3.5%.
Fed raises interest rates but lowers forecasts for GDP growth, inflation, median neutral rate, and expected hikes next year (two down from three).
A dovish hike, but not dovish enough for markets?
7.15pm GMT
The Federal Reserve has also added a line about monitoring "global economic and financial conditions" to its statement.
That suggests Fed governors are more worried about the state of the world economy, and the recent volatility in the markets.
Here's what changed in the new @federalreserve statement https://t.co/m4D0LXCDWV pic.twitter.com/7ZsEhK2mY7
7.11pm GMT
The US stock market is falling sharply, losing almost all of its earlier gains.
The Dow, which was up almost 300 points, is now only 39 points higher.
Dow sharply cuts gains after Fed hikes rates, cuts 2019 projection to 2 increases https://t.co/SPz0hnyZMd pic.twitter.com/7VlHk808fT
Nasdaq turns lower after sharply dropping on Fed decision https://t.co/SPz0hnyZMd pic.twitter.com/KsQiPTO3IR
7.09pm GMT
The Fed is justifying its rate hike, by pointing out that the US economy looks robust.
It says:
Information received since the Federal Open Market Committee met in November indicates that the labor market has continued to strengthen and that economic activity has been rising at a strong rate.
Job gains have been strong, on average, in recent months, and the unemployment rate has remained low. Household spending has continued to grow strongly, while growth of business fixed investment has moderated from its rapid pace earlier in the year
7.06pm GMT
Significantly, the Fed has also change the language in its statement.
It now only expects "some" further interest rate rises in future.
The Fed changed the statement to add in the word "some" to its key phrase "further gradual rate hikes" - adding in the word gives the Fed more room to maneuver lower.
7.04pm GMT
The Fed has lowered its forecast for interest rate hikes in 2019.
Policymakers now only expect two rate rises next year, down from three previously.
Dot Plot (Dec. vs Sep.) {DOTS<Go>} pic.twitter.com/z7pUOp8KN2
7.00pm GMT
NEWSFLASH: The US Federal Reserve has voted to raise interest rates, despite pressure from Donald Trump to leave them on hold today.
The FOMC has decided to hike benchmark rates to 2.25%-2.5%, as most investors expected.
More to follow!
6.59pm GMT
Brace for impact@federalreserve
6.57pm GMT
With just a few minutes to go, the Dow is up 1.2% or 285 points at 23,960.....
6.52pm GMT
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?
6.48pm GMT
6.47pm GMT
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.
6.29pm GMT
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.
6.24pm GMT
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.
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."
Related: GSK plans break-up after 10bn Pfizer deal
Related: Italy avoids EU sanctions after reaching 2019 budget agreement
5.55pm GMT
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%.
4.29pm GMT
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.
"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.
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.
2.41pm GMT
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
1.09pm GMT
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.
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.
12.56pm GMT
It's official! The European Commission and Italy have reached an agreement over its 2019 budget.
European Commission Vice President Valdis Dombrovskis said Wednesday that the "agreement is not ideal" but allows the Commission to avoid legal action against Italy "provided that the measures are fully implemented."
The threat of action is not rare in EU terms but it came amid growing tension between the Commission and Italy's populist government, which had vowed to resist any pressure from Brussels.
12.03pm GMT
Here's our news story on the slowdown in UK house price growth, and the dip in consumer price inflation.
Related: London property slump drags back UK house price growth
12.00pm GMT
Britain's factories have produced some Christmas cheer , reporting that orders have risen in December for the second month running.
A pick-up in export demand helped to swell order books, according to the CBI.
"The UK's manufacturing sector enters the Christmas period with a small upswing, with output growth gathering further pace. The firming in exports orders is also particularly welcome.
"But uncertainty over Brexit still casts a long shadow over this sector and the rest of the economy," she said.
11.13am GMT
Here's Dan Tomlinson from Resolution Foundation on the slowdown in UK house price growth:
And house prices are falling ever further in Inner London: down by 2.9% compared to the same month a year ago. pic.twitter.com/yMRxO0CvsO
But but but...
House prices in London are still up by 35% compared to 5 years ago.
Affordability remains a big challenge - and will do for the foreseeable future. pic.twitter.com/KJsRxO7cbh
11.04am GMT
Alastair Neame, senior economist at the CEBR thinktank, also predicts that inflation will keep falling in the months ahead, as retailers fight for business.
"Lower inflation is another welcome sign that household finances will continue to improve over the coming months, but low confidence and consumer indebtedness look set to keeping spending in check."
11.01am GMT
Today's inflation report also shows that clothing prices have fallen by 0.8% in the last year -- the only thing that has actually got cheaper since November 2017.
10.50am GMT
Related: Business Today: sign up for a morning shot of financial news
10.43am GMT
Tom Stevenson, investment director at Fidelity International, reckons Brexit angst is pulling inflation down, as retailers are forced to slash prices.
"Brexit uncertainty and flagging consumer confidence are showing up in increasingly soggy data, with inflation hitting lowered expectations this morning. Retailers are being forced into heavy discounting to persuade shoppers to open their wallets, offsetting the inflationary impact of the weaker pound. Clothing was a notable drag.
"However, it's not all bad news as last week's ONS earnings data showed that UK wage growth has risen to a healthy 3.3%. UK households are getting progressively better off.
10.30am GMT
UK inflation is clearly on a "downward trend," says Mike Jakeman, senior economist at PwC.
That's a boost to workers, as earnings are expected to keep rising this year (although a disorderly Brexit could change that!).
"Consumer price inflation slowed in November, to 2.3% year on year, from 2.4% in October. This was the slowest pace of increase for 20 months and was driven by the effect of lower global oil prices, which reduced the cost of a tank of fuel for British motorists by an average of 2.6 pence a litre in the past month. But even setting the aside the effects of volatile components such as fuel, it is clear that inflation is on a downward trend.
Both headline and core inflation measures have steadily slowed during 2018, as the effect of a weaker pound has diminished and economic growth has remained tepid.
UK CPI #inflation ticks down slightly to 2.3% in November, in line with consensus forecasts, driven largely by falling fuel prices and recreational goods such as video games pic.twitter.com/vHM2n7C4Gt
10.07am GMT
Good news for anyone looking to get onto the housing ladder: UK house price inflation has hit its lowest in over five years.
The price of the average UK property rose by 2.7% in the year to October, down from 3% in September.
Average UK house price growth slowed to 2.7%y/y in October according to the latest ONS/Land Registry figures. London & the N. East both saw house price falls, while the N. West & N. Ireland are currently seeing the fastest rates of average house price inflation. pic.twitter.com/MBVyO5RiXk
Overall, prospects for the new year are not good as all the recent Brexit and general economic uncertainty are not reflected in these statistics.
'On the ground, December is proving to be fairly typical - generally quiet but still, thankfully, a fair number of buyers who need to move checking out what they consider are the best value options.'
9.56am GMT
At 2.3%, inflation is moving close to the Bank of England's target.
Jeremy Thomson-Cook of foreign exchange firm World First says:
"Inflation is moving back towards the Bank of England's target of 2% and allowing real wages gains to extend into the end of the year.
The main pressure within the CPI basket is naturally fuel given the precipitous falls we have seen in the cost of a barrel of oil but food prices have also been kept in check ahead of the Christmas period.
Today's inflation figures show CPI at 2.3% and core inflation at 1.8% cent - both at 20 month lows. Increasingly looks like (unanimously agreed) @bankofengland rate rise in August was wrong call. pic.twitter.com/qZDJXUZZmE
9.52am GMT
This chart confirms that cheaper fuel helped to pull UK inflation down last month.
Petrol prices fell by 2.6 pence per litre between October and November 2018, compared with a rise of 1.8 pence per litre between October and November 2017. This was partially offset by an upward contribution from sea fares, which rose this year but fell a year ago.
9.42am GMT
The drop in inflation means UK wages are outpacing the cost of living.
Average earnings are currently rising 3.3%, meaning real wages are growing by around 1%.
Overall good news for UK inflation and real wages trends as CPI falls to 2.3% and RPI to 3.2% in November
9.36am GMT
Newsflash: Inflation in the UK has fallen to its lowest level since March 2017, giving shoppers a much-needed boost ahead of Christmas.
The Consumer Prices Index dropped to 2.3% per year in November, the Office for National Statistics says, down from 2.4% in October.
9.22am GMT
Newsflash: Banking group Santander has been fined 32.8m by the UK financial watchdog, for a frankly shocking failure to handle the accounts and investments of deceased customers properly.
Santander did not notify the FCA of the nature or extent of the issues it faced, including the numbers of potentially affected customers and assets, and was selective in the information it provided.
Accordingly, Santander's conduct fell below the standards of openness and cooperation expected of an authorised firm.
At least Santander is consistent. Treated regulator as shoddily as it did bereaved customers. Tried to hide failings. pic.twitter.com/0aqqorVcnr
9.09am GMT
Italian bonds and stocks are rallying this morning, on relief that Rome has reached a peace deal with Brussels over its budget.
Last night, the Italian Treasury announced it had reached a "a technical agreement with EU officials" which could avoid an "excessive deficit procedure" being launched against the eurozone's third-largest member.
French Finance Minister Le Maire says French deficit next year will be 3.2% of GDP.#awkward
Italian stocks rise 1.5% and bond yields fall to September levels after press announces budget deal.
The European market seems less excited about it. pic.twitter.com/0xyxS4nBSw
8.44am GMT
World stock markets have a decidedly edgy feel this morning, as investors wait for the Fed's rate decision.
China's Shanghai Composite index has fallen by 1%, amid ongoing anxiety about trade relations with the US. Japan's Nikkei has dipped by 0.6%.
8.13am GMT
Boom! Shares in pharmaceutical giant GlaxoSmithKline have soared by 5% at the start of trading, after it surprised the City with a break-up plan.
8.08am GMT
Investors around the globe will be watching Fed chair Jerome Powell tonight, when he explains tonight's interest rate decision.
Shares could soar, or slide, depending on the guidance that Powell gives for future rate hikes in 2019. Ditto the dollar.
Market participants widely expect the statement to be somewhat dovish and the markets believe that going into 2019, the Fed isn't going to be this aggressive because of the tighter financial conditions. Mr Powell is likely to indicate two or maximum three rates hikes in 2019. For investors, one to two rate hikes would be considered more dovish to neutral but two to three rate hikes would be aggressive because the economic indicators have started to flash warning light with respect to any aggressive monetary policy.
In terms of trading the event, aggressive tone by the Fed would be negative for the equity market and the sell-off may become intense. The Dow Jones may take a nose dive and the move could in the range of 300-500 points. However, a dovish statement could support the equity markets and it would restore some confidence so investors expect about 150-250 points move for the Dow on the back of this.
7.53am GMT
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
I hope the people over at the Fed will read today's Wall Street Journal Editorial before they make yet another mistake. Also, don't let the market become any more illiquid than it already is. Stop with the 50 B's. Feel the market, don't just go by meaningless numbers. Good luck!
It is incredible that with a very strong dollar and virtually no inflation, the outside world blowing up around us, Paris is burning and China way down, the Fed is even considering yet another interest rate hike. Take the Victory!
So great that oil prices are falling (thank you President T). Add that, which is like a big Tax Cut, to our other good Economic news. Inflation down (are you listening Fed)!
The market is pricing in a 72.3% probability of the Fed hiking today. This would be the fourth-rate hike for 2018. However, the real concern for the market is what comes next. With growing fears over the health of the global economy, the markets simply don't think the US economy can handle higher rates.
Traders will be watching for dovish signs, such as the dropping of the phrase "further gradual rate rises" from the statement and a softening of the dot plot from three hikes to at most two. In short, if the Fed must hike today, and they will struggle to justify not hiking on current US economic strength; then it will need to be a dovish hike to prevent the US equity markets dumping once more. The dollar has traded lower across the week in anticipation of a dovish hike.
The Powell Fed is aiming to reclaim discretion, distancing itself from straitjackets like R-star, the words "gradual increases in the target range," and -- eventually -- the dot plot. This is a stylistic change, but markets hear DOVISH and price less than two hikes through 2019. pic.twitter.com/jE9vrlHy87
Related: Growth fears drive FTSE 100 to two-year closing low - as it happened
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