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22/09/2016

Weekly News Bites: At a rate of "nots"

At a rate of "nots": The Federal Reserve left interest rates unchanged, but three of the ten voting members on the monetary committee favoured a rate hike, a shockingly high level of non-consensus in comparison to usual. A rate increase in either November or December of this year has been strongly alluded to. Worryingly, the Fed's longer-run interest rate forecast has dropped yet again to 2.9% from 3.0%, partly due to dismally low productivity. In any event, equities, bonds and emerging market currencies rallied as the status quo prevails for a little while longer. (22/9)

Vol-au-vent: In its latest forecast, the Paris-based Organisation for Economic Cooperation and Development has slashed the UK’s growth projections in half, now expecting 2017 output to rise by 1%; it was only in June it forecast growth to be 2%. The global economy has also been downgraded, with growth next year expected to be 3.2% from the June expectations of 3.3%. Interestingly, volatility in financial markets is given as one reason why. (22/9)

The long and the short of it: The Nikkei is up by nearly 2%, and yen has weakened by about 0.5%, following the Bank of Japan's surprise move to adopt a target for long-term interest rates, in what is a first for quantitative easing anywhere. While the BoJ maintained its 0.1% negative interest rate, it set a "yield curve control" under which it will buy long-term government bonds in order to keep 10-year bond yields around current levels of 0%. It will also allow inflation to overshoot its target its 2%. That latter point is wishful; the inflation bridge has not been crossed on a sustained basis in years. (21/9)

A dose of their own medicine: Pharmaceutical giant GlaxoSmithKline – the fourth most valuable public company in the UK – has appointed Emma Walmsley as its new chief executive, promoting her internally. She will be the firm's first female chief executive, and the seventh female currently heading a FTSE 100 company. The other six are Alison Brittain at Whitbread, Alison Cooper at Imperial Brands, Liv Garfield at Severn Trent, Moya Greene at Royal Mail, Veronique Laury at Kingfisher and Carolyn McCall at Easyjet. Here’s to 43 more. (21/9)

Drive up a wall: The Mexican peso has been a poor bet since the financial crisis, nearly halving in value. The last two years have been particularly bad, as the currency has been caught in a perfect storm of falling oil prices, US monetary tightening and domestic political malaise. The torrid run has gotten worse in recent days – the peso has broken through all-time lows repeatedly– as the probability of a Donald Trump victory in the upcoming US election increases. Walling off Mexico, as he has promised, is not peso-positive. (20/9)

Finding allegory: If you watched a film in a UK cinema over August, you were part of a wave that led to the best August attendance figures since 2011. According to Digital Cinema Media, 18.1 million tickets were sold, a huge 26% increase on August last year. While Britons eschewing summer holidays abroad due to a weak pound is part of the plot, DCM believes it is mostly a story of better-than-usual film options such as Finding Dory and The BFG. (20/9)

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