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The Fed is expected to rise the interest rates this week; EU on track for ECB to cut stimulus as planned; Theresa May sees more pressure from the Labour party planned vote

Sep 26 • Morning Roll Call • 183 Views • No Comments

Later on today, all eyes will be on the Federal Funds rate and whether the Federal Reserve will raise interest rates. According to Bloomberg, in their survey, the economists believe strongly that there will be another rate hike and we will see a quarterly increase of 25 basis point all through June next year. In addition, the surveyed economists believe that the upper margin of the Fed’s target range for the federal funds rate would reach 3% in June 2019, where it will remain until the 4th quarter of 2019. It is interesting to mention that the current view of the pace for hikes has changed since June, when the anticipation for another rate hike skip was expected in the December 2018 meeting, but now the Fed watchers believe that the pause in rate hikes will come in September 2019. Furthermore, it is believed that the current trade war fear between the US and China would be overshadowed by the tightening labor market, firming inflation, as well as the stimulus provided by tax cuts and higher government spending, providing relief to the Fed officials.

On Tuesday, the European Central Bank chief economist Peter Praet said that the EU economy is still on the correct track to allow the ECB to cut stimulus by one more step until the end of 2018. However, normalization is not seen speeding up more than what was projected in June this year. He also commented on the words of Mario Draghi that we have heard on Monday, stating a prediction of a ‘relatively vigorous’ pick-up in underlying inflation, where Praet rejected the idea of a message hidden between the words, and that there are no changes to the current scheme. As per Reuters, the ECB expects the 2.6 trillion euro bond purchase scheme to end at the end of 2018, and as previously noted, the interest rates are to remain steady through the summer of next year.

A topic that cannot be avoided of course is Brexit, and this time it seems that the UK opposition Labour Party has plans to put extra pressure on the Prime Minister May, by voting down on her Brexit deal with the EU, and is also keep options opened for a second referendum and the possibility of Britain staying in the EU after all. According to BBC, Labour’s Brexit spokesman, Keir Starmer stated that the Party would vote down a bad deal, as well as a ‘no deal’ as it is bad for the country. He has also added that in case that the Prime Minister comes with a deal that is not suitable for the Party, it will be voted down. It is important to mention that in the case that the Labour Party wins over the Tory rebels, then May’s deal can be defeated in the Parliament, leading to further chaos, and if it happens there should be a general election that would mark the failure of the Prime Minister on the most important issues that UK is facing.

ECONOMIC CALENDAR EVENTS FOR SEPTEMBER 26th

NZD Trade Balance
NZD ANZ Business Confidence
USD New Home Sales
USD FOMC Economic Projections
USD FOMC Statement
USD Federal Funds Rate
USD FOMC Press Conference

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