Wednesday preview: Fed set to raise interest rates for first time in nine years

The Federal Reserve is widely expected to raise interest rates on Wednesday for the first time in nearly a decade.

Most analysts have pencilled in a 25 basis point rise in interest rates to 0.50%. Fed chair Janet Yellen earlier this month indicated that the central bank may increase rates after saying the economic outlook is “very closed to balanced”.

“Hawks on the committee have pointed to the fact that the US economy is humming along nicely, driven largely by some decent growth in its services sector, and that the US economy should be more than able to absorb a doubling of the baseline Fed Funds rate from 0%-0.25% to 0.25%/0.5%,” said Michael Hewson, senior market analyst at CMC Markets.

David Morrison, market analyst at SpreadCo., said there is still a small chance the Fed could delay hiking rates amid a slump in commodities and concerns about the risks of a knock-on effect from China’s slowing economy. He also noted that inflation has remained well under the Fed’s 2% target which may be a worry for some policymakers.

US inflation rose 0.5% in November from a year ago, in line with expectations and following a 0.2% increase in October, the Bureau of Labor Statistics revealed on Tuesday.

“But if the Federal Reserve can’t manage to move rates off its 0-0.25% zero band what does that say about economic outlook?,” Morrison said.

“After all, this rate was set back in December 2008 at the height of the financial crisis. Surely things have improved since then.”

He added low interest rates have hurt savers and damaged investor confidence. “Ultimately the main beneficiaries have been the very same financial institutions who were chiefly responsible for the financial crisis in the first place.”

Wednesday 16 December

INTERIMS
Dixons Carphone , Supergroup, Tungsten Corporation

QUARTERLY PAYMENT DATE
Brunner Inv Trust, M Winkworth

INTERNATIONAL ECONOMIC ANNOUNCEMENTS
Balance of Trade (EU) (10:00)
Capacity Utilisation (US) (14:45)
Consumer Price Index (EU) (10:00)
Crude Oil Inventories (US) (15:30)
FOMC Interest Rate (US) (19:00)
Harmonised Index of Consumer Prices (EU) (10:00)
Housing Starts (US) (13:30)
Industrial Production (US) (14:45)
MBA Mortgage Applications (US) (12:00)
Wholesale Price Index (GER) (07:00)

GMS
Alba Mineral Resources, Johnson Matthey, Twentyfour Income Fund Limited Ord Red

FINALS
Elegant Hotels Group , IDOX

AGMS
Altona Energy, BowLeven, EpiStem Holdings, Henderson Far East Income Ltd., Standard Life Equity Income Trust

UK ECONOMIC ANNOUNCEMENTS
Claimant Count Rate (09:30)
Unemployment Rate (09:30)

FINAL DIVIDEND PAYMENT DATE
Plexus Holdings, World Careers Network