Fed meeting: on hold for now
The Fed meets this week and is expected to keep interest rates on hold, following three cuts earlier this year. The minutes from the October meeting emphasised that the Fed thinks the cuts are enough to support the economy for the moment, despite the manufacturing slowdown. The Institute for Supply Management’s manufacturing Purchasing Managers’ Index declined to 48.1 in November, which indicates that activity is contracting. But the labour market is strong, as is consumption, which accounts for 70% of the economy. Retail-sales data are also released this week, which should shed more light on whether consumers have stayed cheery. But downside risks prevail, most notably the US-China trade war. Although there was hope a phase-one trade deal could be reached, the long-term outlook remains uncertain. All eyes will be on the US to see whether it imposes tariffs on $156bn-worth of Chinese goods this Sunday. It remains to be seen how long the Fed will leave rates unchanged: the futures market has priced in another cut for 2020.