The Fed surprised markets and commentators, including us, as the FOMC minutes showed plans to shrink the balance sheet beginning in 2017. Steve Blitz says this is significant because:
• Signalling shrinkage of its balance sheet shows Fed planning for three increases
• Fed’s intention is also to present a smaller target to its critics
The market has focused its attention on the People’s Bank of China’s (PBoC) interest rate and RRR cut. But more importantly, we also saw another move by the PBoC that reinforces its commitment to allowing the market to play a bigger role. The central bank scrapped the ceiling on rates for deposits of more than one year. This follows the change in the exchange rate regime announced on August 11th, in conjunction with a 1.9% depreciation of the renminbi, aimed at nurturing a more market-driven currency. What does this mean for China and its currency? Click belo...