In one of the most anticipated monetary policy decisions for years, the Federal Open Market Committee (FOMC) kept interest rates unchanged at Thursday’s meeting.

Furthermore, the rate hike path expected by FOMC members was lowered again, and more members do not expect any move in 2015. A significant majority still expect lift-off in 2015.

Furthermore, the Fed raised its GDP forecast to 2.1 per cent growth in 2015 but cut it for 2016 to 2.3 per cent from 2.5 per cent. It also lowered 2017 growth to 2.2 per cent from 2.3 per cent. For the first time, the Fed added the phrase that it was “monitoring developments abroad”.

Earlier in the week, the Organisation for Economic Cooperation and Development (OECD) said the Federal Reserve would be right to begin raising interest rates this week while warning that uncertainty about the path of tightening poses a greater threat to the economy.

In an update of its forecast of the major economies, the OECD predicts that the world economy will grow by three per cent this year and 3.6 per cent next year.

It trimmed these estimates from previous global growth projections of 3.1 per cent for this year and 3.8 per cent for next year, citing primarily a slowdown in emerging market economies like China and Brazil.

Finally, in Britain, annual inflation edged down to zero in August amid a renewed fall in fuel prices and subdued price rises on the high street. Figures published by the Office for National Statistics show that consumer prices rose 0.2 per cent in August compared to July but were unchanged from August of last year, in line with economists’ expectations.

Britain’s annual inflation stood at 0.1 per cent in July. The stubbornly low inflation ensures price growth remains far slower than the Bank of England’s (BoE) target of two per cent. Although Britain’s economy is growing solidly, the BoE is not expected to raise rates any time soon, though some policymakers are wary of inflation rebounding quickly over the next couple of years.

This report was compiled by Bank of Valletta plc for general information purposes only.