All eyes on Fed’s rate decision
The author writes that guessing whether the Federal Reserve hikes rates on Thursday is a futile exercise because even the rate setters appear to be wavering.
Factory output rose 6.1 percent last month from a year earlier, less than the 6.4 percent expected but up from July’s 6 percent.
Fears of a hard landing, the prospect of deflation and bil- lions of dollars spent on keeping the yuan steady raise the prospect of more rate cuts and currency devaluation by Beijing, setting markets up for more volatility.
In Europe, the key item will be final August euro zone inflation data due on Wednesday, which is likely to supply other arguments for the European Central Bank (ECB) to beef up quantitative easing.
Price growth is seen holding steady at 0.2 percent, far off the ECB’s target of just under 2 percent and ECB president Mario Draghi has already warned that the euro zone could dip back into deflation on lower commodity prices and weaker growth from emerging markets.
The big inflation miss and a modification of quantitative easing are just the latest in a long list of troubles for central banks around the globe as developed nations struggle with weak growth and anaemic inflation.
“Are central bankers losing credibility? Preliminary results from our survey show that 68 percent of investors believe so,” RBS said in a note to clients. “Yet, we are stuck in a world where central bankers’ words will determine investment decisions, often beyond fundamental reasoning.”
The Bank of Japan was due to announce its rate decision tomorrow and governor Haruhiko Kuroda was expected to offer a bleaker view on overseas economies and might lower its assessment on the country’s exports next week, sources said. The Swiss National Bank is also expected to keep policy steady. – Reuters