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Federal Reserve risks markets shock with September move 

September 12, 2016

Eric Platt, The Financial Times

Janet Yellen will deliver the biggest shock to markets since taking over as chair of the Federal Reserve should the central bank raise interest rates this month, according to a survey of Wall Street economists that shows more than 85 per cent expect it to hold fire.

The scepticism among economists may concern the Fed’s top officials, who have spent the past month trying to persuade financial markets that an increase at their meeting on September 21 is a possibility given that the US unemployment rate is below 5 per cent and the global fallout from the Brexit vote has been muted.

They have succeeded at least in jolting financial markets out of months of complacency, after comments from two voting members on the Fed’s policy-setting committee on Friday sent US stock and bond prices sliding at their greatest rate since June.

Conviction that Fed policymakers, who in January were projecting four rate rises this year, will tighten policy has been drained by a run of mixed US economic data, including slower jobs growth in August and signs that the services sector has lost momentum. Read more

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