Harold Macmillan, the former British Prime Minister, famously described the main risks facing his government as “events, dear boy, events”. Investors no doubt feel the same way about the most crucial single element in their deliberations, the future actions of the Federal Reserve.
A week ago, the immediate path ahead for the Fed seemed to be well mapped out for the financial markets. There was a clear consensus that the FOMC would taper its asset purchases in its 17-18 September meeting, and would completely end its asset purchases in mid 2014. Furthermore, it seemed increasingly certain that Lawrence Summers would be nominated by the President to be the next Fed Chairman sometime in October, and that the ratification process would end in time for him to take office on 1 February. Now this timetable has been thrown into much greater doubt. Read more