All eyes fo­cused on clues for US Fed fu­ture hikes

Kuwait Times - - BUSINESS -

PARIS:

Just how fast the Fed­eral Re­serve hikes rates next year will be the all-im­por­tant ques­tion global in­vestors will be hop­ing to get an­swered when the US cen­tral bank meets next week. But Fed pol­i­cy­mak­ers are likely to leave them guess­ing un­til the Trump ad­min­is­tra­tion clar­i­fies its tax cut­ting and in­fras­truc­ture spend­ing plans, economists say. There is lit­tle doubt that the Fed will raise in­ter­est rates for the first time in a year on Wed­nes­day, with mar­kets pric­ing in a near 100 per­cent chance for a quar­ter per­cent­age point in­crease in its tar­get range.

“With a rate hike be­ing fully priced in, the fo­cus will be on the state­ment and the up­dated Sum­mary of Eco­nomic Pro­jec­tions,” Unicredit economists wrote in a re­search note. “While fi­nan­cial mar­kets have got­ten ex­cited about the prospects of fis­cal stim­u­lus by the in­com­ing ad­min­is­tra­tion, we ex­pect that FOMC mem­bers won’t in­cor­po­rate such a sce­nario into their fore­casts un­til it has been ap­proved,” they added. The Fed in­creas­ingly stands out among ma­jor cen­tral banks with its tighter mon­e­tary pol­icy af­ter the Euro­pean Cen­tral Bank ex­tended its as­set pur­chases on Thurs­day un­til at least the end of 2017, al­beit at a slower pace.

Mean­while, the Bank of Eng­land is widely ex­pected to keep its key rate steady at 0.25 per­cent at a pol­icy-set­ting meet­ing on Thurs­day and well be­yond as it jug­gles risks from inflation, growth and Bri­tain’s de­ci­sion to quit the Euro­pean Union. On the data front, flash pur­chas­ing man­ager in­dexes from ma­jor economies on Thurs­day and var­i­ous US business con­fi­dence sur­veys will of­fer clues as to how well con­fi­dence is hold­ing up head­ing to­wards the end of the year.

Along with US re­tail sales data on Wed­nes­day, in­vestors will in par­tic­u­lar be look­ing for any signs that the prospect of an­tic­i­pated tax cuts and stim­u­lus is al­ready boost­ing morale. “Anec­dotes and sur­veys sug­gest that business and con­sumer con­fi­dence has im­proved fol­low­ing the elec­tion,” Bank of Amer­ica Mer­rill Lynch economists Michelle Meyer and Alexan­der Lin wrote in a re­search note. —Reuters

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