The Federal Reserve meeting this week will be less noteworthy for what the central bank does than for what it says about the future path of rates. With the traditionally most dovish voices on the Federal Open Market Committee now sounding notably more hawkish, policy makers are likely to try harder to nudge market expectations up to price a steeper path of rate hikes.
Moving in that direction would improve the relative attractiveness of Treasury bonds and the dollar, even as it would highlight the growing economic and policy divergence between the US and other advanced countries. Both outcomes have consequences for investors in stocks and other asset classes.
The Fed will hike rates by 25 basis points on September 26. The decision will provide a vindication of the bank's decision not to react to problems elsewhere in the world at previous policy meetings. The rate increase will point to the Fed's continued progress toward fully meeting its dual mandate, based on continued strong monthly job creation and historically low weekly jobless claims data, as well as a wider set of indicators that support the target of 2 per cent inflation, including the latest wage-increase numbers in the August jobs report.
The central bank's decision won't be a surprise to financial markets, which have already comfortably priced in what would be the eighth rate hike since the Fed embarked on this post-crisis cycle in December 2015. But that consensus does not extend to the future level of rates. Markets continue to feel that the Fed will end up pursuing a path that is less hawkish than the one policy makers have already signaled through their “dot plots” and some of their public remarks.
I suspect that one of the Fed’s goal this week will be to nudge market rate expectations higher. It will seek to do so in a way that doesn't derail US economic momentum and is consistent with medium-term stability.
To that end, several Fed officials have already come out individually to make a stronger analytical case for a more aggressive path of future hikes. One of the more notable voices is Lael Brainard, who has traditionally been viewed as one of the most dovish members of the FOMC.
In a speech last month at The Detroit Economic Club, Ms Brainard described the operational concept of the neutral rate, which many regard as the North Star for the equilibrium Fed funds rate. She said the short-term neutral rate, which will guide better interest rate policy in the next few quarters, is likely to be above the longer-term rate. That would solidify the case for rate hikes that exceed current market expectations.
________
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________
Because this more aggressive rate path would reflect a stronger economy, its pursuit should not derail economic momentum nor pull the rug out from under risk assets. That policy would also be more consistent with genuine and durable financial stability, an issue that the current Board of the Governors under the leadership of Chair Jerome Powell may stress more than previous boards led by Janet Yellen and Ben Bernanke. In the process, the Fed would highlight the growing divergence in economic performance between the US and the other major advanced countries.
Market participants will find it increasingly difficult to ignore the broadening set of Fed signals pointing to the more aggressive path of rate hikes. By converging closer to the Fed policy guidance, the markets’ implied path of future rate hikes would end up repeating a pattern that played out in 2016 and 2017: Start more dovish than Fed guidance, only to validate it later.
This, along with the lessening influence over time of “non-commercial” buyers (including pension funds matching more of their long-dated liabilities through bond purchases, and the spillover effects of the large-scale asset purchase programs of the European Central Bank and the Bank of Japan), would call for higher yields across virtually all Treasury maturities. It would also place considerable pressure on the yield differential between US and German bonds, which is already high in historical terms, ending last week at more than 260 basis points for 10-year maturities. With that comes the prospect that bonds could attract some of the more risk-averse investment flows away from stocks, and place possible upward pressure on the dollar.
All of this shows that widening economic and policy divergence is one of the most important “top-down” issues for investors in stocks and other asset classes. For it to prove consistent with further gains in world stock markets and other risk assets, two developments are necessary to enable a process of convergence from below -- that is stronger growth in the rest of the world. And both fall far outside the Fed’s sphere of influence. Europe and Japan would have to take more comprehensive policy measures to bolster their actual and potential growth rates; and emerging economies need to be able to navigate a further tightening in their external financial conditions.
*Bloomberg
The smuggler
Eldarir had arrived at JFK in January 2020 with three suitcases, containing goods he valued at $300, when he was directed to a search area.
Officers found 41 gold artefacts among the bags, including amulets from a funerary set which prepared the deceased for the afterlife.
Also found was a cartouche of a Ptolemaic king on a relief that was originally part of a royal building or temple.
The largest single group of items found in Eldarir’s cases were 400 shabtis, or figurines.
Khouli conviction
Khouli smuggled items into the US by making false declarations to customs about the country of origin and value of the items.
According to Immigration and Customs Enforcement, he provided “false provenances which stated that [two] Egyptian antiquities were part of a collection assembled by Khouli's father in Israel in the 1960s” when in fact “Khouli acquired the Egyptian antiquities from other dealers”.
He was sentenced to one year of probation, six months of home confinement and 200 hours of community service in 2012 after admitting buying and smuggling Egyptian antiquities, including coffins, funerary boats and limestone figures.
For sale
A number of other items said to come from the collection of Ezeldeen Taha Eldarir are currently or recently for sale.
Their provenance is described in near identical terms as the British Museum shabti: bought from Salahaddin Sirmali, "authenticated and appraised" by Hossen Rashed, then imported to the US in 1948.
- An Egyptian Mummy mask dating from 700BC-30BC, is on offer for £11,807 ($15,275) online by a seller in Mexico
- A coffin lid dating back to 664BC-332BC was offered for sale by a Colorado-based art dealer, with a starting price of $65,000
- A shabti that was on sale through a Chicago-based coin dealer, dating from 1567BC-1085BC, is up for $1,950
Skewed figures
In the village of Mevagissey in southwest England the housing stock has doubled in the last century while the number of residents is half the historic high. The village's Neighbourhood Development Plan states that 26% of homes are holiday retreats. Prices are high, averaging around £300,000, £50,000 more than the Cornish average of £250,000. The local average wage is £15,458.
2025 Fifa Club World Cup groups
Group A: Palmeiras, Porto, Al Ahly, Inter Miami.
Group B: Paris Saint-Germain, Atletico Madrid, Botafogo, Seattle.
Group C: Bayern Munich, Auckland City, Boca Juniors, Benfica.
Group D: Flamengo, ES Tunis, Chelsea, (Leon banned).
Group E: River Plate, Urawa, Monterrey, Inter Milan.
Group F: Fluminense, Borussia Dortmund, Ulsan, Mamelodi Sundowns.
Group G: Manchester City, Wydad, Al Ain, Juventus.
Group H: Real Madrid, Al Hilal, Pachuca, Salzburg.
In numbers: PKK’s money network in Europe
Germany: PKK collectors typically bring in $18 million in cash a year – amount has trebled since 2010
Revolutionary tax: Investigators say about $2 million a year raised from ‘tax collection’ around Marseille
Extortion: Gunman convicted in 2023 of demanding $10,000 from Kurdish businessman in Stockholm
Drug trade: PKK income claimed by Turkish anti-drugs force in 2024 to be as high as $500 million a year
Denmark: PKK one of two terrorist groups along with Iranian separatists ASMLA to raise “two-digit million amounts”
Contributions: Hundreds of euros expected from typical Kurdish families and thousands from business owners
TV channel: Kurdish Roj TV accounts frozen and went bankrupt after Denmark fined it more than $1 million over PKK links in 2013
MATCH INFO
Uefa Champions League semi-final, second leg
Real Madrid (2) v Bayern Munich (1)
Where: Santiago Bernabeu, Madrid
When: 10.45pm, Tuesday
Watch Live: beIN Sports HD
Name: Colm McLoughlin
Country: Galway, Ireland
Job: Executive vice chairman and chief executive of Dubai Duty Free
Favourite golf course: Dubai Creek Golf and Yacht Club
Favourite part of Dubai: Palm Jumeirah
COMPANY PROFILE
Founders: Sebastian Stefan, Sebastian Morar and Claudia Pacurar
Based: Dubai, UAE
Founded: 2014
Number of employees: 36
Sector: Logistics
Raised: $2.5 million
Investors: DP World, Prime Venture Partners and family offices in Saudi Arabia and the UAE
NO OTHER LAND
Director: Basel Adra, Yuval Abraham, Rachel Szor, Hamdan Ballal
Stars: Basel Adra, Yuval Abraham
Rating: 3.5/5
Killing of Qassem Suleimani
MATCH INFO
Osasuna 1 Real Madrid 4
Osasuna: García (14')
Real Madrid: Isco (33'), Ramos (38'), Vázquez (84'), Jovic (90' 2)
Election pledges on migration
CDU: "Now is the time to control the German borders and enforce strict border rejections"
SPD: "Border closures and blanket rejections at internal borders contradict the spirit of a common area of freedom"
Mia Man’s tips for fermentation
- Start with a simple recipe such as yogurt or sauerkraut
- Keep your hands and kitchen tools clean. Sanitize knives, cutting boards, tongs and storage jars with boiling water before you start.
- Mold is bad: the colour pink is a sign of mold. If yogurt turns pink as it ferments, you need to discard it and start again. For kraut, if you remove the top leaves and see any sign of mold, you should discard the batch.
- Always use clean, closed, airtight lids and containers such as mason jars when fermenting yogurt and kraut. Keep the lid closed to prevent insects and contaminants from getting in.
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Guide to intelligent investing
Investing success often hinges on discipline and perspective. As markets fluctuate, remember these guiding principles:
- Stay invested: Time in the market, not timing the market, is critical to long-term gains.
- Rational thinking: Breathe and avoid emotional decision-making; let logic and planning guide your actions.
- Strategic patience: Understand why you’re investing and allow time for your strategies to unfold.
COMPANY PROFILE
Name: Kumulus Water
Started: 2021
Founders: Iheb Triki and Mohamed Ali Abid
Based: Tunisia
Sector: Water technology
Number of staff: 22
Investment raised: $4 million
Key facilities
- Olympic-size swimming pool with a split bulkhead for multi-use configurations, including water polo and 50m/25m training lanes
- Premier League-standard football pitch
- 400m Olympic running track
- NBA-spec basketball court with auditorium
- 600-seat auditorium
- Spaces for historical and cultural exploration
- An elevated football field that doubles as a helipad
- Specialist robotics and science laboratories
- AR and VR-enabled learning centres
- Disruption Lab and Research Centre for developing entrepreneurial skills
