Next week's meeting (September 18) of the US Federal Reserve's key interest rate setting group is looming as the most important for years.
At stake is the health of financial markets from bonds, interbank, shares, commodities and all those other outriders. But it has been overtaken by events: specifically the rescue by the Bank of England of Northern Rock plc, one of Britain's biggest home lenders.The Bank of England will reveal later Friday the terms of its rescue of Northern Rock, which has $US200 billion in assets, but which has been frozen out of the short-term markets by the credit crunch. The bank funds much of its home loan, credit card and other loan book from short-term markets and the rescue means that it is the first significant institution to ask for emergency aid, having exhausted all other options.The news will force the Fed's hand to cut cuts and the market is now punting on a half a per cent trim being the most obvious move, rather than the 0.25% tipped in a survey by Bloomberg. A clutch of statistics out in the US tonight, including retail sales, will also have a big bearing on the Fed's decision because they will give a reading on the state of the wider economy. Industrial production figures are also due.
