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All eyes on Fed meeting this evening

• Posted by Shyam Gokani in Uncategorised
• December 14, 2016
• No Comments

Sterling steadied today after data showed the number of people in work in Britain falling but wages growing, as investors focused on a Federal Reserve meeting later in the day that is set to produce the first interest rate rise in a year.

The Office for National Statistics numbers suggested a slowing in the labour market after the Brexit vote, with the number of people in work falling by 6,000 in the three months to October – the first decline since the second quarter of last year.

Though Britain’s unemployment rate stayed at 4.8 percent, in line with forecasts, that is widely expected to rise next year as companies hold off from hiring as they wait for more clarity on the country’s future ties to the EU, which could take years to be negotiated.

The Fed is all but certain to raise its main rate by a quarter point to 0.50-0.75 percent, in an announcement due at 1900 GMT. But it will be Chair Janet Yellen’s tone, and new forecasts for future rates, that will drive the market response.

In contrast, the Bank of England is expected to keep rates at record lows at a policy meeting concluding on Thursday. Market pricing shows investors expect rates to stay unchanged until the end of 2018 because of uncertainty over the Brexit process, despite higher inflation fed by sterling’s 10 percent trade-weighted fall since the EU referendum in June.