Bank of England releases minutes from its 4 September meeting

Market movers today

Key focus will be tonight’s FOMC meeting. It seems increasingly likely that the Fed will change its forward guidance away from the ‘considerable time’ language to something linked with the development towards its goals of full employment and inflation at 2%. It might put in some other soft language instead to avoid a too hawkish message. However, the economy is clearly moving in the right direction and the Fed will need more flexibility in its policy to raise rates earlier if necessary. Focus will also be on the new projections for the Fed funds rate, where we may see a move forward of the first rate hike as signalled by several Fed members. Finally, this meeting will have a press conference where Janet Yellen could adjust the tone if there is a strong market reaction after the statement and projections. The challenge for the Fed is that market pricing is still far below its current projections and it needs to try and adjust in a not too abrupt way. We continue to look for the first rate hike in April 2015 based on a continued robust recovery and strengthening labour market.
Before the Fed meeting a range of key figures is due for release: labour market report for July in the UK, final CPI data for August in the euro area and CPI and NAHB figures in the US.
Bank of England releases minutes from its 4 September meeting. Although the release might be overshadowed by the Scottish independence referendum tomorrow, it will be interesting to see if more MPC members have joined the hawkish camp after the August meeting had a split in votes with two members advocating a rate hike.
In Sweden, minutes from the Riksbank's 3 September meeting are released. For more on Scandi markets see page 2.

Selected market news

Bloomberg writes that China is injecting CNY500bn (USD81bn) into the nation’s largest banks, and although it has not been confirmed by Peoples Bank of China (PBoC), it signals the concern with the country’s economic slowdown. It is reported that the PBOC injects short-term liquidity into China’s five largest banks via its standing lending facility and that the recent run of weak production and money supply and lending data have opened up for the monetary stimulus.

Opinion polls on Scottish independence vote. Yesterday’s three polls (from Daily Telegraph, Survation and Scotsman) all put support for remaining in the UK at 52% with 48% backing independence, when undecided voters are excluded – and all suggested that support for a Yes vote was rising. However, the three polls gave differing estimates for the proportion of voters still undecided, ranging from 14% to 6%.

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