After many weeks of anticipation the US central bank decided not to increase interest rates, with 9 out of 10 members voting to keep rates with their current 0 – 0.25% target. The general viewpoint for rates remaining as they are is that recent economic activity could put pressure on inflation without an interest rate rise. Although labour market growth in the US has been robust the growth and economic outlook is not as bullish as it perhaps was prior to recent events in China.
Developed markets reacted negatively to the announcement with Germany’s DAX, the worst performing main market in Europe, down over 3% on Friday. Whilst US and Japanese indices, also, fell by over 1.5%, select emerging markets like China, India and Turkey rose.
Although rates did not rise on this occasion the US market still looks to be in the best position for an interest rate rise in the developed market economies and this could mean markets will move sideways until there is more certainty.
In the US retail sales in August increased and the biggest growth area was in restaurants bars showing consumer confidence. A strong dollar and low fuel prices meant consumer prices dropped by 0.1% which is the only drop this year.
In Brazil the government announced a USD7 Billion spending cut to try and balance the countries 2016 books. Simultaneously the government also announce that they plan to raise a further USD8Billion by re introducing a financial transaction tax that was abolished eight years ago.
The Japanese credit rating was cut to A+ with commentary from S&P stating that they see little chance of the government increasing growth and inflation in the next few years.
In India inflation fell to 3.66% partly due to a stabilization in the food prices due to better weather conditions. Lower inflation has created calls to the Reserve bank to lower interest rates from their current 7.25%.
Eurozone industrial production increased 0.6% for the first time in three months. Annual inflation slowed from 0.2% in July to 0.1% in August.
UK Inflation fell to zero in August whilst wage growth grew by 2.9% which is the fastest in 6 years. UK unemployment rates held at 5.5% which points to inflationary pressures.
It is certainly fair to say that attention is needed when selecting assets at the moment. Contact [email protected] for personalized advice.