The International Monetary Fund cut its global economic outlook for 2017 by 0.1 per cent to 3.4 per cent in wake of UK’s Brexit, citing concerns for this year and the coming year.

According to the IMF’s World Economic Outlook Update, “the Brexit vote implies a substantial increase in economic, political, and institutional uncertainty, which is projected to have a negative macroeconomic consequences, especially in advanced European economies.”

The IMF forecasts that the UK and Europe will be mostly hit by the fallout. The global economy, which is already sluggish, will also suffer as a result. This puts responsibility on policymakers to improve banking systems and implement plans to carry out structural reforms.

The ECB kept its interest rates steady, as policymakers waiting for more information assessing the impact of Brexit. After last Thurs­day’s policy session in Frankfurt, the 25-member governing council left the benchmark interest rate (the refi-rate) unchanged at a record low of zero per cent. In April, the refi-rate was also kept un­changed, following an unexpected rate cut in March of 0.5 basis points. The deposit rate was not changed from 0.40 per cent, after a reduction of 10 basis points in March. The marginal lending facility rate was maintained at the same level of 0.25 per cent after a reduction of five basis points in March.

In the US, a report by the National Association of Realtors (NAR) shows an unforeseen rise in US existing home sales during June. The NAR stated that existing home sales surged by 1.1 per cent to an annual rate of 5.57 million in June from the downwardly reviewed figure of 5.51 million in May. Analysts were projecting that home sales will fall to 5.48 million from the 5.53 million initially reported in the prior month. Lawrence Yun, chief economist at NAR said: “Existing sales rose again last month as more traditional buyers and fewer investors were able to close on a home despite many competitive areas with unrelenting supply and demand imbalances”.

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

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