US Federal Reserve begins unwinding stimulus and leaves interest rates on hold - as it happened
America's central bank will begin unwinding its huge stimulus programme next month, as it leaves borrowing costs on hold
- Closing summary: What happened today
- Janet Yellen's press conference begins
- Fed chair says balance sheet reduction will be gradual
- Yellen: I've not met with Trump again
- BREAKING: Fed leaves interest rates unchanged
- What the experts say
9.40pm BST
Right, time to wrap up. Here's a quick summary.
Banks stocks rally as Fed aims for one more hike in 2017. Dollar rebounds and yields higher on hawkish dots https://t.co/jirBcFOVHz pic.twitter.com/ikNK31rA6y
The Federal Reserve has announced it will begin the great unwinding of the gargantuan stimulus programme it began close to a decade ago in the teeth of the worst recession in living memory.
As widely expected, the Fed voted to start reducing its portfolio starting in October, and kept interest rates at a range of 1% to 1.25%.
Related: The great unwinding: Fed begins slow demise of its post-crash stimulus
9.23pm BST
Wall Street has taken today's news in its stride.
The Dow Jones industrial average and the S&P 500 share indices have both closed slightly higher, at new record highs.
9.03pm BST
Reaction to the Fed's announcement keeps flooding in.
Geoffrey Yu of UBS Wealth Management predicts the Fed will unwind its balance sheet slowly, as it takes a step into the unknown.
It has taken a decade for policymakers to begin to understand the effects of quantitative easing and with that debate still raging, markets will need to absorb the impact of its reversal.
Because of the uncertainty this could entail, we expect the Fed to adopt a 'do no harm' approach.
In spite of record low unemployment and increasingly loose financial conditions, benign wage growth kept hawkish members of the committee grounded, with a downward drift in the longer-run expected policy rate path as represented by the dot plots.
With 11 out of 16 participants calling for another rate hike before the end of the year, the decision to leave the cash rate unchanged at 1.25% provides a welcome respite for the FOMC to evaluate the economic data over the coming weeks and months; the pause reduces the risk of pre-emptively removing policy accommodation, yet leaves ample fuel in the tank should inflation start to accelerate more aggressively than forecast in the second half of the year.
This is set to be a marathon, rather than a sprint, with a slow-but-steady runoff in Treasury and Mortgage Backed Security holdings to begin in October. This step reflects rising confidence that the recovery is sufficiently durable to withstand a slow withdrawal of emergency policy measures, a full ten years after the financial crisis struck.
The strong economy and loose financial conditions also gives the central bank confidence that the market will be able to handle the extra bond issuance.
Now that the #Fed has introduced its balance sheet reduction program, look for tapering in QE implementation from the ECB early next year
8.53pm BST
Back in the markets, investors now believe there's a 60% chance of a US interest rate rise in December, to 1.5%.
That's up from 50% before today's announcement.
Markets are now pricing in more than a 60% probability of a December #Fed hike (up from approx 50% before the #FOMC meeting) #EURUSD pic.twitter.com/lCoEX9eK5d
8.40pm BST
And finally, a question that gets to the heart of the matter....
8.34pm BST
Yellen expresses concern about the massive cyber attack at credit monitoring agency Equifax.
She calls it a "serious breach" and urges Americans to carefully monitor their credit reports.
WHOA: Fed Chief #janetyellen scolds #Equifax credit company for its data breach. Warns all customers to remain VIGILANT in monitoring credit
8.30pm BST
Q: What would it take for the Fed to start QE again?
Yellen gives a long answer, repeating that the Fed could potentially expand its balance sheet in future if there was a "material shock" to the economy, meaning interest rate cuts weren't a strong enough responce.
Yellen: "It will be up to future policy makers......"
Sounds like a farewell statement...
8.29pm BST
Here's a video clip of Janet Yellen's (deservedly) stinging criticism of Wells Fargo:
Yellen: "I consider the behavior of Wells Fargo towards its customers to have been egregious and unacceptable." https://t.co/mmSQqCqih6 pic.twitter.com/urC34Dary4
8.22pm BST
Q: Will you take action against Wells Fargo over its huge misselling scandal?
Yellen roasts Wells Fargo, saying its actions are "Egregious and unacceptable".
8.18pm BST
Q: Will there be operational problems when vice-chair Stanley Fischer steps down (early) next month? It will deprive the Federal Reserve of its quorum of four governors.
Yellen pays tribute to Fischer's contribution to the Fed, saying she appreciated his "wise council and friendship".
Yellen says she hopes that Randy Quarles, Trump's nominee for vice chair of supervision, will be confirmed by the Senate.
8.15pm BST
Asked about financial regulation, Yellen says it's important that reforms put in place since the crisis stay put.
She adds that regulations could be 'tailored' to avoid undue burden on the sector.
Yellen: We want to -- and Congress should -- tailor regulations to the risk posed by different kinds of banks.
8.12pm BST
Ah, the elephant in the room.....
Q: Your current term expires in February 2018 - Have you discussed the situation with Donald Trump, or had any thoughts about your plans?
Breaking: Fed chair Janet Yellen says she has NOT met with President Trump to discuss the next Fed chair. She won't say if she wants to stay
As clock ticks on #Yellen's term as chair, she says she hasn't met Trump since her last meeting early in his presidency
8.06pm BST
Refreshingly, Janet Yellen says the Fed doesn't know why inflation is below target this year.
We need to "figures out" if the factors are persistent of transitory, she adds.
Yellen says there's been a "miss" this year on inflation target and not sure why
8.02pm BST
Here's Tom Stevenson, investment director for personal investing at Fidelity International, on the Fed's balance sheet reduction plan:
As expected, the Fed has fleshed out its plans for reining in the size of its balance sheet. This has ballooned since the financial crisis on the back of America's massive quantitative easing stimulus programme.
The balance sheet has expanded to $4.5trn since the financial crisis. The plan is to start reducing it from next month and to progressively accelerate the rate at which bonds are returned to the public market. The Fed hopes that by telegraphing its $1trn to $2trn taper, it can avoid unsettling bond and equity markets.
8.01pm BST
Yellen reminds the press conference that the Fed has now raised interest rates four times in this cycle, and it still thinks the recovery is on a "strong track".
7.59pm BST
Q: The Fed is locked into reducing its balance sheet, and raising interest rates in a gradual fashion. So what will you do if economic conditions don't turn out as you expect?
Yellen denies that the Fed is 'locked in' to a particular path. We are assessing incoming data, and these plans are subject to change.
7.57pm BST
Yellen says that the Fed could "stop its balance sheet rolloff" in future, if adjusting interest rates is "insufficient" to respond to changes to the economic outlook.
7.54pm BST
Q: Is the Fed concerned that markets are at, or close to, record highs?
Yellen replies that it's not easy to see how asset prices will affect the economic outlook, but the Fed is "taking account of asset prices when setting monetary policy".
Question for Yellen about "buoyant" stock market/other rising asset prices & whether it concerns Fed. Response? To sort of dodge question.
7.51pm BST
Onto questions, and the first one is a zinger.
Q: Why the Fed is unwinding its balance sheet when core inflation is consistently below target, and the unemployment rate for Black Americans is 8% (much higher than the 4.4% national average).
Asked about sacrificing black/minority employment gains for low inflation, Yellen responded with a recitation of everything on Fed's mind
7.48pm BST
Yellen repeats that the Fed's balance sheet will be shrunk gradually and predictably.
It will start by cutting its holdings by up to $10bn per month this autumn; a small change designed to help the markets adjust.
Janet Yellen says "We do NOT plan on making adjustments to our balance sheet normalization program." pic.twitter.com/WWy9DaCR5a
7.42pm BST
Policy is not on a preset cause, says Yellen - a reminder to the markets that events could yet force the Fed to chance course.
7.40pm BST
On interest rates, Yellen says the Federal Fund Rate won't have to rise much further to get back to a 'neutral stance'.
7.39pm BST
Yellen warns that US economic growth in the current quarter will be hurt by the recent hurricanes that battered Florida and Texas (as well as the Caribbean).
Inflation will also be pushed higher, temporarily, because gasoline has become pricier.
Yellen emphasis on near-term hit to data from hurricanes seems like pre-emptive indication a few bad data points won't alter rate hike plans
Fed's Yellen expresses her condolences to all those Americans who have been affected by the recent hurricanes in Texas and Florida.
7.36pm BST
Over in Washington, Federal Reserve chair Janet Yellen has sat down to face the press and explain today's decisions.
She starts by predicting that the US economy "will continue to expand over the next few years", and that the Fed's accommodative monetary policy stance will help create more jobs.
We expect the job market will strengthen somewhat further'
7.32pm BST
What does 'reducing the Fed's balance sheet' mean in practice?
Well... once the financial crisis stuck, the US central bank created more than a trillion of new dollars to buy American government debt, and bonds backed by mortgages.
Robust fundamental data and solid corporate earnings should allow the bull market to continue, but political, fiscal and monetary uncertainties still present risks.
The Fed's announcement today to start unwinding the balance sheet has already been priced in by markets, but we continue to believe the Fed's "quantitative tightening" could be the cause of some heightened volatility, especially as the impact on the real economy remains largely unknown."
7.24pm BST
Wall Street has reacted calmly to the news that the Fed will start unwinding its balance sheet in October.
The main stock indices have dipped slightly, with the Dow down 0.25% and the S&P 500 losing 0.1%.
The S&P is down 5 points. Guess all the bears who said stocks were propped up all this time by QE were right!
7.21pm BST
Skimming through the Fed statement, it appears that policymakers are still confident that the US economy is recovering.
Here's a flavour:
Information received since the Federal Open Market Committee met in July indicates that the labor market has continued to strengthen and that economic activity has been rising moderately so far this year.
Job gains have remained solid in recent months, and the unemployment rate has stayed low. Household spending has been expanding at a moderate rate, and growth in business fixed investment has picked up in recent quarters.
Fed: touch more hawkish than I'd have expected.
7.18pm BST
The dollar has jumped by 0.4%, reversing its weakness before the Fed's announcement.
Traders are reacting to the news that the Fed still expects to raise interest rates once more this year, and three times in 2018.
Dollar surging: Fed kept rates unchanged and balance sheet runoff starts Oct. Credit Suisse: FOMC Could Upend broad USD negative view #fx pic.twitter.com/nw2UAKm4k2
7.14pm BST
In the markets, the yield on short-term US debt has jumped, meaning bond prices have fallen.
US 2-year Treasury yield hits more than two-month high after Fed announcement https://t.co/xfVVsynLAw pic.twitter.com/h26rkNEK4m
7.11pm BST
The Fed also flags up the damage suffered by hurricanes in recent weeks.
It predicts inflation could push higher in the short term, but hopes the US economy will bounce back:
Hurricanes Harvey, Irma, and Maria have devastated many communities, inflicting severe hardship.
Storm-related disruptions and rebuilding will affect economic activity in the near term, but past experience suggests that the storms are unlikely to materially alter the course of the national economy over the medium term.
Fed: Hurricanes unlikely to alter economy's course medium term.
7.10pm BST
Importantly, some Fed committee members have become more dovish about the path of interest rates in 2018.
The new Dot Plot (in yellow) shows that two hawkish policymakers have pulled their horns in (one was expecting rates to hit 3% next year!)
Changes in the DOTS: {DOTS<Go>} pic.twitter.com/B08GKDadGe
7.02pm BST
Boom! The Fed says it will start shrinking its balance sheet in October.
That means it will beginning the task of unwinding the stimulus it injected into the US economy once the financial crisis began.
7.01pm BST
Breaking! The Federal Reserve has left interest rates unchanged at today's meeting, at up to 1.25%.
Fed policymakers are also sticking with their prediction of one more rate hike this year.
7.00pm BST
Here we go....#Fed
6.57pm BST
The dollar is dipping slightly as traders brace for the Fed statement to hit the wires.
This has pushed the pound up to $1.359, up 0.8% of a cent today.
6.47pm BST
Oliver Jones of Capital Economics predicts that the Fed will sound more dovish about interest rates today.
He suspects they will drop the notion of another rate hike in 2017, and push it into 2018.
While the federal funds rate is almost certain to stay on hold on this occasion, updates to FOMC members' median forecasts - which are currently for one more rate hike this year and three further three hikes in 2018 - will be closely scrutinised as usual.
Although we no longer expect the Fed to raise rates again in 2017, we are still expecting four rate hikes in 2018 as inflation rebounds.
6.35pm BST
Wall Street is becalmed, with less than 30 minutes until the Fed announcement, which is followed by Janet Yellen's press conference.
The Dow Jones industrial average is up 2 points, or a measly 0.01%, having hit a record high last night.
6.20pm BST
Do play along with Fed Bingo at home, or in the office.
it's #Fed Bingo day. Statement and press conference both count. Your caller is Janet #Yellen . Eyes down for a full house! pic.twitter.com/RUWmICwJW4
6.15pm BST
Fingers crossed, and seatbelts buckled, please....
We've had 13 Fed tightening cycles, with 10 ending in recession, and 3 soft landings. "So let's pray for a soft landing" - Rosenberg, @CNBC
6.14pm BST
Today's meeting of the Federal Open Market Committee is one of the most eagerly anticipated in a while. But what will Wall Street, the City, and investors around the world be looking for - and what will it mean for the rest of us?
1) Will the Fed raise interest rates today? Spoiler alert: this is seen as very unlikely. We've already seen two US interest rate rises this year, and American inflation probably isn't bubbling away enough to justify a third today.
Odds of another Fed rate hike this year now about 50:50 ahead of FOMC meeting. pic.twitter.com/7i1ZdbWpkC
Consensus anticipates #Fed normalization w/unchanged '17 dots. '18 & '19 dots could shift lower while language may turn slightly more dovish pic.twitter.com/HXSCpTayLE
It's go time for the Fed https://t.co/18DI9StR1J pic.twitter.com/Ib8IkF160b
6.06pm BST
In one hour (18:00 GMT), the Federal Reserve will announce its Interest Rate Decision. The previous value was 1.25% pic.twitter.com/vgqqKG6m4G
5.06pm BST
World markets are hovering around new highs, with the MSCI All Country World Index up another 0.09% to 487.82. But overall investors are - mostly - sitting on their hands ahead of the latest US Federal Reserve interest rate decision, due in just under two hours.
The exception, as previously mentioned, is the Spanish market, which has been rattled by the tensions in Spain surrounding a proposed independence referendum for Catalonia. The final scores showed:
4.20pm BST
Most European markets (and indeed the US as well) are treading water ahead of the US Federal Reserve meeting.
An exception is Spain, where the Ibex has dropped 1% after growing tensions over the proposed Catalonian independence referendum, with police arresting political officials in Barcelona. David Madden, market analyst at CMC Markets UK, said:
With the exception of the IBEX 35, it has been an uninteresting day for European indices. Catalonia has been calling for a referendum on independence for some time, and the fragile state of the Spanish economy has exacerbated it. Spanish police have raided the headquarters of the Catalonian government and scenes of unrest on the back of this has weighed heavily on the Spanish market. The move by the Spanish authorities is likely to stoke independence calls, and this spooked investors.
3.59pm BST
Ahead of the US Federal Reserve meeting, here is ING Bank's crib sheet:
3.41pm BST
Oil prices have been moving higher recently on hopes that Opec and its partners would extend their production cuts designed to deal with a global supply glut. Indeed, crude is on track for its biggest third quarter gain in 13 years.
However they have now come off their best levels after the US Energy Information Administration reported a bigger than expected rise in crude stocks last week.
EIA crude inventories up 4.591 million vs 3.493m expected (API reported 1.443m on Tuesday) - #Brent and #WTI off 20c ,minor response #oil
3.27pm BST
#APPLE is down 2.2%, drags $DJ to flat line. No definite trigger, though new Watch seeing negative reviews (1) ^KO
3.26pm BST
Markets continue to drift ahead of the Fed meeting. Connor Campbell, financial analyst at Spreadex, said:
Despite effectively not moving after the bell the Dow Jones still managed to flirt with a fresh all-time high - that's just how consistent it has been in the last 3 weeks. Whether it can continue to build may be dependent on how the dollar reacts to September's statement from the Federal Reserve - which in turn could come to depend on a) how cautious Yellen and co. are in regards to reducing the $4.5 billion balance sheet, and b) what kind of (December) rate hike signals are sent out.
For now, however, the greenback is sitting firmly on its hands. The dollar is down 0.3% against the pound, 0.1% against the yen and flat against the euro. Sterling is also up 0.2% against the euro, the currency receiving a bit of good news in the form of this morning's surprisingly strong UK retail sales reading.
3.12pm BST
More weak data from the US, with the effects of Hurricane Harvey starting to be felt.
US existing home sales fell 1.7% to 5.35m units in August, down from 5.44m in July and the lowest level since this time last year, mainly due to a lack of supply.
Steady employment gains, slowly rising incomes and lower mortgage rates generated sustained buyer interest all summer long, but unfortunately, not more home sales. What's ailing the housing market and continues to weigh on overall sales is the inadequate levels of available inventory and the upward pressure it's putting on prices in several parts of the country. Sales have been unable to break out because there are simply not enough homes for sale.
Some of the South region's decline in closings can be attributed to the devastation Hurricane Harvey caused to the greater Houston area. Sales will be impacted the rest of the year in Houston, as well as in the most severely affected areas in Florida from Hurricane Irma. However, nearly all of the lost activity will likely show up in 2018.
2.37pm BST
Some deal news from Japan. Reuters reports:
Toshiba Corp has agreed to sell its prized semiconductor business to a group led by U.S. private equity firm Bain Capital, a key step in keeping the struggling Japanese conglomerate listed on the Tokyo exchange.
Toshiba said it had signed a contract for the deal worth about 2 trillion yen ($18 billion), the latest and perhaps final twist in a deal that only hours earlier had seen the company leading toward an agreement with its U.S. joint venture partner Western Digital Corp.
2.34pm BST
US investors are in wait and see mode ahead of the Federal Reserve's interest rate decision and the press conference from chair Janet Yellen. But markets still remain at record levels.
The Dow Jones Industrial Average and the S&P 500 both edged up 0.01% at the open, while the Nasdaq Composite slipped 0.04%.
2.13pm BST
If the US Federal Reserve is more hawkish than expected on interest rates and its balance sheet plans, then the US dollar could move sharply higher after its recent weakness, reckons Fawad Razaqzada, market analyst at Forex.com:
In making their decisions, policymakers at the Fed are likely to take into account last month's sharper-than-expected rise in CPI inflation, and weigh this against somewhat softer macro pointers elsewhere in the economy. But with employment remaining healthy and inflation being so close to its target, the Fed may get the market ready for another rate rise in December and also provide a plan for balance sheet normalisation. In other words, the Fed may be more hawkish than dovish at this meeting.
If so, we would expect the dollar to rip, especially against currencies where the central bank is still very dovish - for example, the Japanese yen and the Swiss franc. This outcome may also be modestly negative for the US stock markets. If the dollar rises and stocks fall, then gold's response may be relatively muted, although as a dollar-denominated commodity it too should fall. Obviously if the Fed comes across as more dovish than hawkish then one would expect the opposite reaction in these markets.
2.01pm BST
After hitting record highs last night, Wall Street is expected to open calmly in 30 minutes time.
That means the MSCI World stocks index remains at record levels, after fairly unspectacular sessions in Asia and Europe today.
US Opening Calls:#DOW 22370 -0.03%#SPX 2507 0.00%#NASDAQ 5991 +0.01%#IGOpeningCall
Starting BSN if that's the right term, is a return to 'peace-time' policy before Janet Yellen departs (if she does).
It's also an leap into relative unknown (never been done before) which is happening into a market which seems as relaxed as a teenager getting ready for a bungee jump. This market knows no fear.
1.53pm BST
A thought for the day, as we await news from the Fed:
As the Fed ponders shrinking its bond holdings, a reminder from https://t.co/IQtf7StDTO pic.twitter.com/CIoDO7joYg
1.35pm BST
There's drama in Russia today, as one of the country's largest banks seeks help.
B&N has sought a bailout from the central bank; making it the second bank to hit trouble in three weeks.
B&N Bank, Russia's 12th largest bank by assets, is one of three top privately held banks highly exposed to Otkritie - Russia's largest private lender until the central bank rescued it last month - through an informal group known as the "Garden Ring."
The central bank estimates Otkritie may have a balance sheet hole of up to 400bn rubles; senior Russian bankers say the final total may be twice that.
B&N Bank staff declined to comment outside its head office, three kilometers (1.9 miles) from the Kremlin, while a truck belonging to a firm called Shredder Express, which offers mobile document shredding, was parked on a private road in front
B&N Bank... said it had under-estimated the problems within the banks it had bought during an expansion drive. https://t.co/MPbgrGbP4n
1.16pm BST
All this week, the Guardian has been turning a spotlight on the escalating problem of debt in the UK.
Today, the boss of Britain's second-biggest doorstep lender, has told us about how illegal money lenders are targeting council estates, in search of vulnerable customers to sign up.
"Loan sharks live in the same block of flats that our customers live in, they live in the same council estates, they drink in the same pubs, they go to the same betting shops. You don't find a loan shark, a loan shark finds you.
"So the typical approach would be at a school gate to a mother: 'I see your kid's toes are hanging out of their shoes, it breaks my heart. Can't you get a loan off Provident?' - 'I can't, I failed to pay up on the last one, I can't get another one.' - 'I'll tell you what, I'll lend you 500. Don't worry about when you have to give me it back, I'll pop around every week and you can just pay me' - but the repayments never cease."
Loan sharks are circling, says one of UK's biggest doorstep lenders https://t.co/kw5kcSSJ9q
12.31pm BST
A New York credit ratings agency set up after the financial crash by former private investigator Jules Kroll has shunned London for its European headquarters because of Brexit.
"Brexit did influence us coming to Dublin " it wasn't worth taking the risk on London, and actually Dublin is a good alternative and maybe better in some ways."
Related: Lloyd's of London firm moves European base to Dublin over Brexit
"The cost of housing is not so much the issue, it's more people's families ties, as it is always in moving people from one country to another."
12.07pm BST
This chart highlights how Britons spent more on non-food items in August, and also relied more on internet shopping and catalogues (non-store spending).
This is a promising sign for an industry that investors have shunned in recent months due to headwinds such as a rising minimum wage, and higher input costs in line with the Sterling fall.
The pound is now moving in the right direction for importers, and moderate inflation could be coming into play - lessening competitive pressures and making it easier for these companies to absorb rising input costs.
11.49am BST
Here's Capital Economics' take:
Strong retail sales figs this morning. Robust growth in sales values suggests not much belt-tightening happening despite real pay squeeze. pic.twitter.com/QMJGqCvP6K
11.35am BST
Credit Suisse has joined the ranks of City experts predicting that the Bank of England will raise interest rates in November, from 0.25% to 0.5%.
But they add a proviso - such a rate hike would be a mistake.
We think the BoE has misdiagnosed the amount of slack and growth potential in the UK economy.
The hike is unlikely to have a profoundly negative impact on the economy, but there is a risk of a non-linear response to the first rate hike in ten years. A tighter response to an (entirely) externally driven inflation overshoot today runs the risk of a sustained inflation undershoot in the future.
Sept 15 - BoE's Vlieghe says "rising pay pressure" could lead to rate hike soon
Sept 20 - BoE survey finds UK wage growth is "subdued"
11.02am BST
Britain's economy will lag behind most international rivals next year, as the eurozone's recovery strengthens
That's according to the OECD, which has just updated its economic forecasts.
The upturn has become more synchronised across countries. Investment, employment and trade are expanding.
OECD 2018 GDP forecasts:
USA 2.4%
Canada 2.3%
Germany 2.1%
Euro area 1.9%
France 1.6%
Italy 1.2%
Japan 1.2%
UK 1%https://t.co/z6qo1CZdvY
Related: UK growth will trail Italy, France and Germany next year, says OECD
11.01am BST
Andrew Sentance, senior economic adviser at PwC, reckons UK shops benefitted because more people stayed at home this summer (as foreign holidays are rather pricier since the Brexit vote).
He also believes that the first UK interest rate in a decade is imminent:
"It is encouraging that retail sales proved resilient and bounced back in August. Anecdotal reports from retailers suggest that spending may have been helped by more "staycations" in response to the weakness of the pound which pushes up the cost of overseas travel.
"The underlying picture has not changed greatly, though. In the past three months, retail sales volumes were just over 2 percent up on a year ago - and the annual growth rate has been hovering around 2 percent for most of this year. This is substantially below the growth rate of around 4.5 percent recorded in the three years 2014 to 2016 when inflation was much lower.
10.49am BST
Hold on a moment, though. The Bank of England's latest healthcheck on the UK economy suggests that consumers are cutting back.
The BoE's latest Agents Survey, just released, suggests that cautious shoppers are cutting back, or buying cheaper items. Higher inflation, though, means they're having to pay more at the tills.
10.17am BST
Jake Trask, FX research director at OFX, reckons the jump in retail spending in August will encourage Britain's central bank to raise interest rates soon:
"For the Bank of England, this data is yet more evidence that an interest rate hike is needed sooner rather than later, in an effort to get inflation back under control. Should CPI print 3% or higher in October, then we may see a rate hike as early as November, when the next quarterly Inflation Report is due.
"Former Monetary Policy Committee doves, Andrew Haldane and Gertjan Vlieghe, have already indicated that they're close to switching sides, so the Bank will only need one other Committee member to join them before the rate can rise back to pre-Referendum levels."
10.06am BST
The acceleration in UK retail sales last month is surprising, given household incomes are being squeezed by inflation.
It may show that people are borrowing more, warns Neil Wilson of ETX Capital:
Those retail sales numbers are not going to assuage fears about the consumer credit splurge
Sturdy 1% rise in @ons retail sales Aug rounds off solid summer for consumer spending despite pay squeeze (but more reliant on borrowing?)
Third consecutive monthly rise in retail sales growth. Will be lots of focus on August, but the monthly growth figures are VERY volatile. pic.twitter.com/DvimMHHJ77
Underlying trends in retail sales - price inflation still up and volume growth holding up. Growth in sales values is very strong. pic.twitter.com/4OpSumtDB8
9.43am BST
UK retail sales have now risen for three months in a row, as this chart shows:
9.38am BST
Breaking! UK retail sales were much stronger than expected in August.
The Office for National Statistics reports that retail sales jumped by 1.0% last month, beating City forecasts, and suggesting that consumers are still hitting the high street.
Stroooooong retail sales and the British pound is officially on another mad one pic.twitter.com/oopj4NOAH4
9.26am BST
Britain's small businesses don't share the sense of optimism in the markets.
Confidence among UK firms has taken a tumble in the last three months, according to the Federation of Small Businesses. It's Small Business Index has dropped to just +1 this quarter, down from +15 in April-June, and near to the -3 seen after last summer's Brexit vote.
"Rising inflationary pressure and a weakening domestic economy are the twin drivers of plummeting confidence among small firms and consumers alike.
Optimism among UK small firms has tumbled to its lowest level since EU referendum a/c Fed of Small Businesses survey
9.06am BST
There's big news in the steel industry this morning.
If I worked at Port Talbot, I wouldn't much like the look of this para in Thyssen/Tata statement pic.twitter.com/iAqCDoyRwY
Related: Tata Steel to merge European operations with ThyssenKrupp
8.55am BST
Peter Rosenstreich of Swissquote Bank fears that markets could react badly if the Federal Reserve announces that it will start unwinding its stimulus programme, and cut the size of its balance sheet.
He argues that investors are simply too relaxed, given the risks of geopolitical instability around the globe:
The big news event on 20 September will be the report of the US Federal Reserve's Open Market Committee - we believe the central bank will finally announce plans to start selling its massive holding of bonds. This is likely to begin in October. Meanwhile, the Fed is unlikely to move interest rates.
What does this mean for the US dollar? Possibly a shock. Markets are calm - too calm, really, like those western films where the sheriff rides into an empty town. Despite the tensions in North Korea and the Middle East, despite a see-sawing US president, despite implied volatility, willingness to take risks is historically unprecedented, which we know could end in tears. Markets continue to rationalize this, by seeing low inflation, solid growth and gradual central bank normalization. We're not so sure. A balance-sheet unloading could end the 'feel good' environment, sending both bond and stock markets southward.
8.37am BST
Asian markets remained calm today, despite Donald Trump's threat to 'totally destroy' North Korea.
The South Korean won strengthened a little, shrugging off Trump's remarkable attack on 'rocket man' Kim Jong Un.
Today's front page - Trump, Boris, Gaga... pic.twitter.com/4jOgWV2sw8
Despite myriad different macro-events fighting for attention - including a deadly earthquake in Mexico, the latest hurricane devastation in the Caribbean, Donald Trump's sabre-rattling speech at the UN and Boris Johnson's Brexit boasting - the markets are only interested in one thing this Wednesday: September's Federal Reserve meeting.
8.14am BST
World stock markets are at record highs as investors await tonight's Federal Reserve decision.
The MSCI All Country World Index has nudged up to 487.66, up from 487.37 yesterday.
Investors are buckling up for another Fed policy update which may contain news and/or hints about the timing of further policy tightening by way of balance sheet unwinding and the next rate hike.
7.59am BST
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
(Fed dot plot) FOMC members estimate a 3% interest rate in the long run, chart @FT https://t.co/4B6OV7J3s1 pic.twitter.com/O172AaKCcC
The element that investors are going to pay a lot of attention is the update on the dot plot. We expect the Fed to show more softer approach to the future interest rate hike.
According to their last projection, the Fed expected seven rate hikes by the end of 2019. However, in the new forecast, the market is widely expecting them to drop one interest rate hike.
European opening call @LCGTrading $FTSE +3 points at 7278$DAX -8 points at 12553$CAC -6 points at 5231#EuroStoxx -7 points at 3524
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