Key focus will be tonight’s FOMC meeting. It seems increasingly likely that theFed will change its forward guidance away from the ‘considerable time’ language tosomething linked with the development towards its goals of full employment andinflation at 2%. It might put in some other soft language instead to avoid a toohawkish message. However, the economy is clearly moving in the right direction andthe Fed will need more flexibility in its policy to raise rates earlier if necessary. Focuswill also be on the new projections for the Fed funds rate, where we may see a moveforward of the first rate hike as signalled by several Fed members. Finally, thismeeting will have a press conference where Janet Yellen could adjust the tone if thereis a strong market reaction after the statement and projections. The challenge for theFed is that market pricing is still far below its current projections and it needs to tryand adjust in a not too abrupt way. We continue to look for the first rate hike in April2015 based on a continued robust recovery and strengthening labour market.
Before the Fed meeting a range of key figures is due for release: labour marketreport for July in the UK, final CPI data for August in the euro area and CPI andNAHB figures in the US.
Bank of England releases minutes from its 4 September meeting. Although therelease might be overshadowed by the Scottish independence referendum tomorrow,it will be interesting to see if more MPC members have joined the hawkish camp afterthe August meeting had a split in votes with two members advocating a rate hike.
In Sweden, minutes from the Riksbank’s 3 September meeting are released.
Read the full report: FX Daily