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El-Erian Says Fed to Hike Despite Weaker Economic Data

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It's decision day at the Fed, oil drops, and U.K. real incomes fall more than expected. Here are some of the things people in markets are talking about today.

Fed day

The Federal Open Market Committee is widely expected to announce an interest-rate increase when the central bank releases its latest monetary policy decision at 2 p.m. Eastern Time today. Fed Chair Janet Yellen will hold a press conference to explain the decision 30 minutes after the release, with both the path of future rate increases and how the bank plans to shrink its $4.5 trillion balance sheet likely to hog the limelight. The dollar weakened for a third day and U.S. Treasuries edged higher ahead of the announcement. 

Oil slump

A barrel of West Texas Intermediate for July delivery was trading at $45.92 at 5:50 a.m. as data showed U.S. stockpiles increasing and a report from the International Energy Agency predicting production from non-OPEC countries would increase faster than demand next year. The continuing oversupply in the global oil market is well illustrated by the fate of one supertanker, floating idly off the coast of Africa. 

U.K. real wages fall

Basic pay in the U.K. grew at a slower-than-expected 1.7 percent, the lowest annual pace for more than 2 years. Wages fell 0.6 percent after inflation was taken into account. For Bank of England Governor Mark Carney, the data add to the headaches he faces ahead of tomorrow's monetary policy decision. For U.K. Prime Minister Theresa May, her attention will remain focused on trying to strike a deal with Northern Ireland’s Democratic Unionists to keep her Conservative Party in power. 

Markets rise

Overnight, the MSCI  Asia Pacific Index was little changed while Japan's Topix index slipped 0.1 percent as the dollar weakened ahead of the Fed decision. In Europe, the Stoxx 600 Index was 0.6 percent higher at 5:36 a.m. with technology firms leading the gains as they continue their rebound from Monday's drop. S&P 500 futures added 0.1 percent

Coming up...

While the Fed decision will dominate the trading session, there is also plenty of economic data coming out. At 8:30 a.m., the inflation report for May is due, with headline CPI expected to fall back to 2.0 percent, and core expected to remain at 1.9 percent. At the same time, retail sales growth numbers for May will be published, with the main reading expected to be zero percent for the month, and ex-auto and gas expected to have increased by 0.3 percent. 

What we've been reading

This is what's caught our eye over the last 24 hours.

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