In its last monetary policy meeting for the year, the US Federal Reserve (Fed) gave a strong signal that it was on track to raise interest rates sometime next year. The Fed changed its language and now expects it can be ‘patient’ in beginning to normalise policy.

The new phrase replaced the expectation that rates stay near zero for a “considerable time” after the end of its quantitative easing (QE) programme.

In the meantime, Eurozone industrial output increased by 0.7 per cent year-on-year in October, following a revised 0.2 per cent rise in the previous month. Production was boosted by production of consumer goods.

However, on a monthly basis, production experienced a marginal increase of 0.1 per cent, indicating a weak start to the fourth quarter.

The month-on-month increase was less than the 0.2 per cent increase forecast by economists.

These data do little to alleviate the view of European Central Bank (ECB) President, Mario Draghi that the risks for the Eurozone economy are on the downside.

Finally, the UK’s first public tests to assess the banks’ ability to withstand another financial crisis showed that all but one of its major banks passed a balance-sheet health check.

However, the Bank of England (BOE) warned that two of the nation’s biggest lenders needed to improve their capital levels. This positive outcome emerged after the British banking industry struggled through six years of balance sheet restructuring following the financial crisis.

Only one lender – the Co-operative Bank – had to present new plans to strengthen its balance sheet.

Part publicly-owned Royal Bank of Scotland Group PLC and Lloyds Banking Group just made it through the test but, according to the regulator, they have already put in place sufficient plans to raise their capital levels.

Bank of England Governor Mark Carney said the test showed that British banks were ‘significantly more resilient’ than last year.

This article was prepared by Bank of Valletta for general information purposes only.

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