The Federal Open Market Committee (FOMC) decided to keep rates on hold at a range of 0.5 per cent to 0.75 per cent.

This decision was expected by the market.

The Federal Reserve said there had been a continuous im­pro­ve­ment in the labour market and also highlighted that eco­nomic activity is expending at a moderate rate. Consumer and business sentiment have im­proved recently while household spending has con­tinued to rise moderately.

The FOMC said that although inflation has been rising in the recent quarters it was still below the committee’s two per cent longer-run objective. The com­mittee also said that economic conditions warrant only “gradual increases” in interest rates.

In the meantime, figures published by European statistics agency Eurostat showed that the eurozone’s GDP grew by 0.5 per cent in the fourth quarter, compared to the previous quarter, and rose by 1.8 per cent from the same quarter in 2015. Analysts had estimated that GDP would improve to 0.4 per cent from the third quarter’s preliminary prediction of 0.3 per cent expansion.

On an annual basis, growth stayed at 1.8 per cent though it was forecasted to come in at 1.7 per cent.

In 2016, GDP grew by 1.7 per cent in the eurozone and by 1.9 per cent in all EU countries. Economists are predicting that the European Central Bank will continue with its asset purchase programme of €60 billion monthly from April 2017 and then taper its purchases gradually in 2018.

Finally in United Kingdom, the government issued the much-awaited Brexit white paper which sets out the principles and strate­gies that will be implemented for the UK’s withdrawal from the EU. Brexit Secretary David Davis said the document confirmed Theresa May’s vision of “an independent and truly global United Kingdom”.

The UK’s strategy would be led by 12 principles set by the Prime Minister. May said in the foreword to the paper: “We do not approach these negotiations expecting failure, but antici­pating success”. Mr Davis also stressed that the UK “wants the EU to succeed”.

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

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