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The Fed stops, signals, then moves

| Posted by: Paul Donovan | Tags: Paul Donovan

  • The US Federal Reserve did what it said it would do, and tightened monetary policy with a quarter-point rate increase. There is no possible way even the most sensationalist of media could present this as an exciting decision. The forecasts continue to signal three rate increases next year.
  • The Bank of England is up next, and again no change is expected – in spite of the governor having to relearn the lost art of letter writing, and explain to the Chancellor (hopefully in simple language) why inflation exceeded its target range. The government was gently reminded that Parliament is sovereign, and wants a final say on the terms of the EU divorce.
  • The European Central Bank is expected to do nothing today. The interesting thing is whether there will be any signs ECB President Draghi's addiction to easing has been cured. Probably not. The question for investors is when (not if) the ECB stops its money-printing operation entirely.
  • There are assorted consumer price inflation figures from various Euro empire provinces, which are unlikely to distract investors. UK and US retail sales are due – in both economies real household incomes are probably better than is popularly reported.