In its monetary policy meeting last Thursday, the European Central Bank left its key interest rates unchanged and maintained its quantitative easing programme. The main refinancing rate remains at zero per cent, the deposit rate at -0.40 per cent and the marginal lending facility rate at 0.25 per cent.
Facing low inflation and weak growth, the central bank retained its quantitative easing programme of €80 billion a month till March and then at a decreased rate of €60bn a month till December 2017. The ECB said the asset purchase programme can be increased or extended beyond December if the Council sees a sustained adjustment in the path of inflation with its inflation target.
In the meantime, the International Monetary Fund (IMF) slightly raised its growth outlook for the US economy this year and in 2018, citing a possible change in the policy mix under the leadership of Donald Trump to increase spending on the military and infrastructure.
The US economy is expected to grow by 2.3 per cent in 2017 and 2.5 per cent in 2018. The IMF had previously predicted that the economy will expand by 2.2 per cent in 2017 and 2.1 per cent in 2018. On the other hand, the IMF said that global growth will rise to 3.4 per cent in 2017 and 3.6 per cent in 2018, from 3.1 per cent for 2016.
In Europe, Eurostat reported that eurozone inflation rose as anticipated in December. On an annual basis, the consumer price index (CPI) rose 1.1 per cent in December, following a 0.6 per cent gain in November and in line with initial expectations. A similar higer rate was reported in September 2013.
The rise in the CPI reduces concerns of deflation. However, core inflation, that is, excluding energy, food, alcohol and tobacco, was recorded at 0.9 per cent, slightly higher than the 0.8 per cent recorded in November. As a result, concerns remain that the increase in inflation might only be temporary. On a monthly basis, the CPI increased by 0.5 per cent in December.
This report was compiled by Bank of Valletta for general information purposes only.