Expectations were high last week heading into the US Federal Reserve’s September decision, with the FOMC announcing the beginning of the balance sheet wind-down and the prospect of one more rate hike before year-end. The Fed will commence balance sheet reduction in October at a rate of $10 billion per month with an additional $10 billion added once every three months until the total amount of balance sheet sales reaches $50 billion monthly. Apart from policy, existing home sales tumbled -1.70%, extending the current contractionary trend for a third straight month as concerns about the housing outlook multiply.
Switching gears, the UK Pound crashed towards the end of the week before briefly recovering on the heels of a Moody’s sovereign credit downgrade to A2. In addition, a speech from Theresa May indicating that she wants to set an official two-year transition with deadlines to jumpstart EU negotiations weighed on the currency. Across the English Channel, Eurozone annualized inflation climbed to a four-month high of 1.50% through the end of August, adding to tapering pressure facing the ECB. Canadian inflation also rose on a headline basis, climbing 1.40% year over year through the end of August. Finally, in an unsurprising development, the Bank of Japan refrained from adjusting interest rates and easing after its latest monetary policy meeting.