In its winter forecast, the European Commission cut its 2016 growth projections for the eurozone and warn­ed that risks to the region’s economy are becoming more pronounced.

The Commission projected the eurozone economy to grow by 1.7 per cent this year, slightly slower than the 1.8 per cent estimated three months ago. The forecast for 2017 was held unchanged at 1.9 per cent. The unemployment rate is expected to fall to 10.5 per cent in 2016 and 10.2 per cent in 2017.

Risks to the economy include “policy reactions to migration and security threats, which could put further pressure on the Schengen system” of passport-free travel in Europe “as well as uncertainty surrounding further implementation of much-needed reforms,” Marco Buti, the Commission’s director general for economic and financial affairs, said in a statement.

In the meantime, according to the minutes of its most recent rate-setting meeting, the Bank of England monetary policy committee unanimously voted to hold the benchmark interest rate at 0.50 per cent.

This was the first unanimous vote since July of last year. Lone hawk policymaker Ian McCafferty dropped his call for an interest-rate increase as officials cut their growth and inflation forecasts and signaled borrowing costs will stay low.

Policymakers made their judgments against a backdrop of weak crude oil prices, unsettled global equity and commodity markets, volatility stemming from China’s slowdown and uncertainty about Britain’s upcoming vote on its membership in the European Union.

In the US, the services sector ex­panded at its slowest pace in nearly two years, raising the likelihood that persistent weakness in manufacturing is starting to spread to the rest of the economy. The Institute for Supply Management’s (ISM) non-manufacturing index fell to 53.5 in January. This is the lowest since February 2014. The result was less than the 55.1 expected by economists. The reading for December was 55.8.

Last week the ISM said its purcha­sing managers’ index for the manufacturing sector crept up to 48.2 in January from a downwardly revised 48.0 in December. Reading below 50 indicate a contraction in activity.

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

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