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 After more than a year of posturing and a couple of false starts,
the Federal Reserve is seen raising its rates by a token 25 basis
points at 1900 GMT.
It will be a highly symbolic move, coming seven years to the day
since the U.S. central bank cut them to zero as the post-Lehman
crash financial crisis engulfed the world and sent economies
spinning into recession.
"It is a foregone conclusion that the Fed is going to raise rates,"
said Kully Samra, a managing director at U.S. focused investment
manager Charles Schwab in London.
"But I'm pretty sure too that Janet Yellen is going to use the word
gradual (in reference to the possible pace of future hikes) quite a
few times during the press conference."
That hope that the Fed will stress a softly approach was helping
soothe jittery markets that have been roiled again over the last
couple of weeks by a fresh slump in oil prices and move down in
China's increasingly influential yuan.
Wall Street was expected to open around 0.5 percent higher and
European shares were up 0.6 percent as reassuring economic data
helped the main bourses consolidate sharp gains made on Tuesday.
Growth in Germany's private sector slowed a tad this month Markit's
PMI survey showed, but it remained a high enough level to suggest
Europe's biggest economy will see robust demand going into the new
year.
Number two economy, the UK, also saw its unemployment rate
unexpectedly fall again although wage growth remained tepid, while
Switzerland business confidence jumped too.
In the currency market it was mainly fine tuning ahead of the Fed
decision.
The dollar edged back from a near one-week high versus a basket of
other major currencies with Citi, the FX market’s single biggest
player, saying positioning in the dollar against the euro was
effectively neutral now after a clearout over the past fortnight.
"Markets are going into the announcement expecting a rate hike but,
on the surface at least, relatively relaxed that it is priced in,"
added Kit Juckes, a strategist at Societe Generale in London.
The euro was buying $1.0916, the dollar fetched 121.80 yen and
Britain's sterling hovered just above $1.50. [FRX/]
READY, FEDY, GO
Oil prices, which have been the other main obsession for investors
in recent weeks because of the pressure it puts on producers
countries and global inflation, slid back again in early European
trading.
West Texas Intermediate (WTI) fell 13 cents to $37.14 a barrel and
Brent was down 85 cents at $37.60 to leave them heading back toward
Monday's 7-year lows.
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Gold rose to 1,065 an ounce and in Asia overnight, MSCI's broadest
index of Asia-Pacific shares outside Japan had jumped 2 percent as
the region caught up the previous session's rallies in Europe and on
Wall Street.
Japan's Nikkei surged 2.6 percent, rebounding from a two-month low
struck the day before as risk sentiment has blown hot and cold ahead
of one of the most-anticipated market events this year.
Australian shares jumped 2.4 percent, while Shanghai stocks edged up
a more cautious 0.2 percent as another tick down in the yuan kept
investors guessing on Beijing's plans for the traditionally
controlled currency.
"A lot of capital will be looking for a temporary home outside of
the U.S. so as to avoid the likely increase in volatility after the
(Fed rate hike) hammer falls," said Martin King, co-managing
director at Tyton Capital Advisors.
"And in the context of our current world markets, for many Japan
looks like a credible home."
Asia's gains helped emerging market stocks climb 1.2 percent as they
gunned for their second consecutive rise having been bashed by nine
straight falls before that.
In the bond markets, both 2- and 10-year Treasury yields rose
fractionally ahead of the Fed decision and after stable U.S.
consumer price data had reinforced the case for a hike.
It was a different story in Europe though. Benchmark German Bund
yields dipped along with the rest of the euro zone. In sharp
contrast to the Fed, the ECB has said it is prepared to continue
easing its policy if necessary. [GVD/EUR]
"The cyclical differences are more pronounced between monetary
policy and the inflation outlook between the U.S. and the euro zone
than in the past," said Dirk Schumacher, an economist at Goldman
Sachs in Frankfurt.
"But it is certainly not unprecedented that the Fed moves first."
(Additional reporting by Patrick Graham; Editing by Janet Lawrence)
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