- Millan Mulraine, economist at TD Securities
The Federal Reserve this week will likely reiterate its willingness to wait some time before increasing interest rates following a volatile month in financial markets that saw some gauges of inflation expectations decline worryingly low. On Wednesday the central bank is expected to announce the end of its aggressive asset-purchasing programme. The critical question now is to what extent central bankers acknowledge threats to their expectations that the American recovery will continue to accelerate and allow them to hike rates in the middle of 2015. The Fed could highlight the risk that inflation might stay below central bank's goal for longer than previously estimated. It could also stress the risk that a global slowdown could pose to the US growth. On the other hand, the unemployment rate has dropped to 5.9% and the economy is expected to grow at a 3% pace in the second half of this year and next, adding to evidence of improving domestic picture, which would urge the central bank to tighten its monetary policy soon.
In the meantime, contracts to purchase previously owned homes rose less than predicted in September, with Pending Home Sales Index climbing 0.3% to 105.0 following the 1.0% fall in the preceding month. A separate report from Markit showed a slowdown of activity in the services sector to the lowest level in six months. The preliminary services sector PMI slid to 57.3 in October, down from 58.9 a month earlier.
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