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Fed rate decision to dominate on Wednesday amid deluge of UK economic data

At its final meeting before the end of the year, the Federal Reserve is widely expected to hike its borrowing costs for the fourth time
Federal Reserve
A quarter point interest rate rise to 2.5% at this final Fed meeting is presumed as a near certainty

All eyes will be on the US Federal Reserve on Wednesday as it limbers up for what is widely expected to be its fourth interest rate rise this year.

On this side of the Atlantic, there will be plenty of economic data for traders to chew on, with the latest UK consumer price index (CPI), retail price index (RPI), producer price index (PPI), and the house price index (HPI).

A recent retreat by oil prices and the Brexit worries weakness of sterling will likely act as opposing forces to last month’s CPI, although most economists take expect the annual rate of inflation could rise to near 2.5% from the current level of 2.4%, with the month-on-month increase to 0.3%, up from 0.1%.

The Bank of England will also be taking notice of the numbers ahead of its Monetary Policy Committee meeting on Thursday.

Rounding off the list of acronyms ending in ‘I’ will be the Confederation of British Industry’s (CBI) distributive trades survey.

It continues to be sparse for company news, with only corporate recovery and professional services group Begbies Traynor set to report their interims.

You’re a mean one, Mr Powell

Federal Reserve boss Jerome Powell could be a little Grinch-like on Wednesday, with the US central bank widely expected to hike its borrowing costs for the fourth time this year.

A quarter point interest rate rise to 2.5% at this final Fed meeting of 2018 has been a near certainty according to the interest rate swaps market for a while now, so no rise would certainly be a shock when the announcement is made on Wednesday evening.

However, beyond this meeting, given the volatility in recent months in the financial market led by Trump’s trade wars and economic growth concerns, there is an expectation that the rate path will be a little shallower in 2019.

In a preview of the Fed rate decision, economists at ING commented: “Like the Fed, we are currently predicting three rate rises next year, but there is a lot of uncertainty, particularly relating to trade and we see the risks increasingly being skewed towards just two hikes.

“Trade is a topic the equity market appears highly sensitive too so bad news on this front could have a significant impact on thinking at the Fed.”

Significant announcements expected:

Wednesday December 19:

US Federal Reserve rate decision

Interims: Begbies Traynor Group PLC (LON:BEG), Manolete Partners PLC (LON:MANO)

Economic data: UK CPI, RPI, PPI, HPI; UK CBI distributive trades survey

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