Fed says not yet

Doves 7 - 3 Hawks

Esther George, Loretta Mester and Eric Rosengren were outvoted by Janet Yellen and her six trusty henchdoves in Washington yesterday. The Federal Funds rate target will remain between 0.25% and 0.5% for at least another six weeks and probably until 14 December.

"The [Federal Open Market] Committee judges that the case for an increase in the federal funds rate has strengthened", said the statement. Indeed it has: a 7-3 split in the FOMC vote is most unusual and the three dissenters, "each of whom preferred at this meeting to raise the target range for the federal funds rate" by a quarter of a percentage point, must have felt strongly about the matter. Moreover, the "dot plot", a chart which identifies the future rate expectations of all 17 voting and non-voting members of the committee, tended to support their aspiration, if not its timing. Of those 17, 14 anticipated a rate increase before the end of this year and a majority expected two more in 2017.

The response of investors was to sell the US dollar, on the basis that there could have been an increase but there wasn't. It weakened most on the day, losing half a cent to the euro and nearly one cent to the pound.

Rand flies, Kiwi grounded

Confirmation that the Fed would remain on hold for another couple of months allowed the South African rand to break through technical resistance against the dollar, giving it the lead for a fifth successive day. The NZ dollar stalled overnight on the threat of lower domestic rates.

As expected, the Reserve Bank of New Zealand kept its Official Cash Rate at 2%, having cut it from 2.25% in August. However, the RBNZ statement noted that "further policy easing will be required" if the economy proceeds as the bank expects. The Kiwi was held back by the news and weakened fractionally against sterling. 

The rand had another strong day, cashing in on the Fed's decision and blowing through technical resistance for a daily gain of 2.1% against the pound. In the last week it has gone up by 7%.

Central banks abound:

Norges Bank will announce this morning what it is doing to Norwegian interest rates. The best guess is nothing. Other central bank input in the next 24 hours includes speeches by senior people from Euroland Britain and Australia.

The highlights of a thinly-populated ecostat agenda are UK manufacturing orders (the CBI's Industrial Trends Survey), US jobless claims and existing home sales and €Z consumer confidence.

Central banker speeches are coming thick and fast. Philip Lowe, the new governor of the Reserve Bank of Australia, has already been up, reassuring parliament that his team are "not inflation nutters" and he will speak again tonight. Bank of England deputy governor Jon Cunliffe and his boss will make separate appearances, as will MPC member Kristin Forbes. The European Central Bank's Mario Draghi will open a risk conference in Germany.