Fed talks continue
This evening’s Fed policy update is the key market event today. Mixed economic data and uncertainties ahead argue for a largely wait-and-see approach by policymakers. The number one issue for the Fed will be the timing of any ‘tapering’ of its asset purchases. Several Fed policymakers, including Chair Powell, have suggested that this may be imminent, so an announcement may come today. However, given that the August US employment report was so disappointing, it seems more likely that will come at the meeting after in early November with a possible intention of starting tapering from December.
Market focus on Fed’s new forecast
Markets will also focus on the Fed’s new forecasts which may see some further change to policymakers’ interest rate expectations. A majority could now project a rate increase by the end of 2022 rather than in 2023. If so, that may cause a few ripples in markets.
Mixed data for the pound
The pound was broadly steady as investors absorbed a mixed batch of data. According to the Office of National Statistics, the public sector net debt fell by £5.5 billion in August compared to a year earlier. However, interest payments had increased to £2.9 billion, well ahead of forecasts. UK manufacturing orders hit a record high. However, global supply chain problems and labour shortages have held back growth output.