All eyes on the Fed interest rate decision.

The Federal Reserve is expected to raise interest rates by three-quarters of a percentage point today and then signal that it could reduce the size of its rate hikes starting as soon as December. Markets are primed for the fourth 75-basis point hike in a row, and investors are anticipating the Fed will slow down its pace before winding down the rate-hiking cycle in March.

The stock market has already rallied on expectations of a slowdown in rate hikes by the Fed, after a final 75 basis point hike Wednesday afternoon. But strategists also say the market’s reaction could be violent if the Fed disappoints. The challenge for Powell will be to walk a fine line between signalling less-aggressive hikes are possible and upholding the Fed’s pledge to battle inflation. The Fed should be dependent on incoming data, and while inflation is coming down, the pace of decline is unclear.

In an historic milestone, the Bank of England has begun to unwind the key emergency support it brought in after the 2008 financial crisis. The bank sold off a tranche of government bonds on Tuesday, as it started to reverse the process known as “quantitative easing” or QE. QE has been credited with helping the UK through shocks such as Covid. But it has also been blamed for bringing in an era of “cheap money” which benefited some but not others. The Bank began QE in March 2009, to prop up the UK economy after banks stopped lending to each other and the country fell into a deep recession. To do this it electronically created new money, which it used to buy government bonds – effectively IOUs issued by the Treasury to fund government spending.

German exports posted an unexpected dip in September, decreasing by 0.5% on the month, while imports fell more than expected, down 2.3%, Federal Statistical Office data showed on Wednesday. Germany had a seasonally adjusted trade surplus of 3.7 billion euros in September, the office reported, surging past a forecast surplus of 700 million euros. Most imports came from China, Germany’s single biggest trade partner, which saw a 5.4% increase on the month in September, while exports to China saw a 2% dip, according to the office.

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