US Fed to do nothing on 20 September
By Arnaud Masset
Markets are suggesting that the US Federal Reserve Bank will decide not to tighten money supplies at its Open Market Committee meeting next Wednesday. Yesterday the USD surged on positive economic news, but the gains were soon reversed against the Euro as well as the dollars from Australia, Canada and New Zealand.
The good news was a better-than-expected inflation report. The August Consumer Price Index gained 1.9% annualised, against a median forecast of 1.8%, and up from 1.7% in July. Core inflation also beat expectations of 1.6% by rising 1.7%.
However, clouds remain on the horizon. First, real average weekly earnings grew only an annualised 0.9%, down from 1.1% in the previous month. This year’s significant recovery of real wage growth might be over. Second, hurricanes Harvey and Irma have distorted economic data. It could take months for the dust to settle. This, we suspect, will encourage the Fed to sit cautiously on its hands next week.
Russia to cut interest
By Yann Quelenn
Today the Central Bank of Russia is likely to cut its key rate to 8.5%. The main reason behind the move is the country’s declining inflation. Consumer prices have increased at an annualised 3.3% in 2017, below central bank’s expectations. The bank now has room to normalize monetary policy.
Russia’s ruble is trading at its highest levels for the last two years, selling at 52 RUB per USD. Before 2013, the USD/RUB was trading around 30. We expect a firming of the ruble over the medium-term.