Daily Market Report - 17/12/2015

We saw the US Federal Reserve raise interest rates by 0.25 percentage points, its first increase since 2006. The US central bank also raised its projection for economic growth next year from 2.3% to 2.4% which suggests the bank does not think the rate increase will damage growth. The rate rise vote was unanimous and the bank cited as the reasons for its action increased household spending and investment by business, along with a continued low rate of inflation. The committee said: "The committee judges that there has been considerable improvements in labor market conditions this year, and it is reasonably confident that inflation will rise, over the medium term, to its 2% objective."

Yellen began her opening statement saying that  today's rate hike "marks the end of an extraordinary seven year period" where the world experienced the "worst financial crisis and recession since the Great Depression". The Fed's actions have helped with the process of "restoring jobs, raising incomes and easing the economic hardship of millions of Americans". She said the recovery has come "a long way", but is "still not complete". Inflation is still low, and there is still room for the labour market to improve. She warned that if the Fed had continued to delay a rate rise it could have been forced to tighten monetary policy too quickly, something that could have led to another recession.

Average earnings in the U.K. increased less than expected in the last three months of the year, reducing the case for higher interest rates. The average earnings index including bonuses rose by 2.4% in the three months to October; this came in below the forecast for a gain of 2.5% data released yesterday showed that the jobless rate in October fell to the lowest level since mid-2008. The rate of unemployment dropped to 5.2% in the three months to October.

Key Announcements

GBP - 09:30: Retail Sales (MoM) (Nov) Expected to rise to 0.5% from -0.6%
GBP - 9:30: Retail Sales (YoY) (Nov) Expected to rise to 0.6% from -0.9%
USD - 14:30: Initial Jobless Claims (Dec 4) Expected to fall to 275K from 282K