A week ago, the Federal Reserve’s September interest-rate announcement was expected to be a relatively straightforward affair, with most analysts and market pricing pointing to no change.

However, last week’s inflation data turned those expectations on their head. The Fed’s rate-setting committee is now expected to tighten policy, lifting the federal funds target range by 25 basis points to 3.75–4.00%.

“We think it’s a closer call than the market is pricing,” said JPMorgan’s Michael Feroli. “But at the end of the day, the Chair’s repeated stern warnings on inflation intolerance risk institutional credibility absent some action to back it up.”

(Continue Reading – LiveSquawk)

European Commission President Ursula von der Leyen on Wednesday said the European Union is opening the door for Canada to become the first associate member of the 27-nation bloc.

The announcement marks a significant change in EU policy and signals a major deepening of ties between Brussels and Ottawa.

Speaking in her annual state of the European Union address in Strasbourg, France, the EU chief said the bloc wants to bring the relationship with Canada “to the highest level possible.”

“And, dear Mark, I said we must urgently reimagine our partnerships so I would like to work with you on opening the door for Canada to being the first associate member of the European Union,” Von der Leyen said.

(Continue Reading – CNBC)

Headline inflation edged up to 3.1% on a widely expected 7% month-on-month rise in fuel costs. The weekly data points to another 3-4% rise in petrol/diesel through September, which we expect to help lift headline inflation up to 3.4% in next month’s data.

But this isn’t what matters to the Bank of England – the question is whether the energy shock is broadening out to other parts of the inflation basket. And there is very little sign that this is happening.

Take food inflation, which slipped even lower in August to 1.1% year-on-year. Producer price data suggests this could actually turn negative in the very near term. That feels unlikely given the wider energy shock. But then again, fertiliser costs have retreated, and so far, the sector is displaying signs of strong competition. In time, we expect food inflation to rise as the full effect of the Iran war feeds through, but that doesn't appear to be the case currently.

(Continue Reading – ING)