The big release of the day was always going to be the Fed’s interest rate decision, which was more or less certainly going to be in favour of increasing rates to 2.25%. While that much was known, the real talking points were likely to focus on any indications of future policy and whether there were any allusions to Trump’s tariffs and their possible economic impact.
In short, everything happened as expected, with rates being hiked by 25 basis points to 2.25%, the majority of officials believing there will be a fourth rate hike in December 2018 and an allusion to the trade war. Chair Jerome Powell said that it was difficult to ‘see much happening at this point’ when asked about the impact of trade tensions, but there is a level of concern about loss of business confidence and the financial market reaction.
Meanwhile, new home sales in the US jumped by 3.5% in August from the previous month to a seasonally adjusted annual rate of 629,000. It was the quickest pace of sales for six months and only provided further reasons for the rate hike. The gains follow two months of decline during summer and will be welcome news for those interested in a strong US economy.
It is another busy day for the US, with the final reading of the GDP growth rate for the second quarter of 2018 at 1:30pm BST. Initial jobless claims up to 22 September will also be released and it will be interesting to see whether the amount of Americans filing for unemployment benefits can fall to a new record low. Durable goods orders are also on the schedule, while Fed Chair Jerome Powell will deliver a speech later tonight.
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