Federal Reserve chair Janet Yellen left open the possibility of an interest rate hike in the Fed’s upcoming meetings. Yellen said that waiting too long to raise interest rates would be unwise as it could leave the Fed’s policymakers behind the curve, thus resulting in increasing rates rapidly, which might trigger a recession.

Yellen said: “Waiting too long to remove accommodation would be unwise,” citing the Fed’s anticipations that the labour market will continue strengthening and that inflation will rise to the Fed’s two per cent target. She did not say if Fed’s policymaking committee will determine if the economy would permit three interest rate hikes this year, as they highlighted in December.

According to data published by Eurostat, the eurozone economy expanded marginally lower than projected in the fourth quarter. GDP was expected to rise by 0.5 per cent in the fourth quarter of 2016 but was revised down to 0.4 per cent though, in line with the third-quarter figures. Year-on-year, Eurostat revised down GDP growth estimates from 1.8 per cent to 1.7 per cent. This adjustment was partially attributed to a decline in industrial production in December 2016, which declined by 1.6 per cent on a monthly basis. In the eurozone, the economy grew by 1.7 per cent while in the EU, the economy as a whole grew 0.5 per cent on the quarter and 1.8 per cent on the year.

UK unemployment fell in the last quarter to December and a measure of the number of employed people rose to a record high, pushing the labour market closer to ‘full capacity’. The number of unemployed people fell by 7,000 in the fourth quarter of 2016 to 1.6 million, leaving the jobless rate for the quarter at 4.8 per cent, thus meeting economists’ expectations. This was the lowest rate since July to September of 2005.

Notwithstanding, the rise in the number of people in employment and labour shortages in some areas, the rise was not fully reflected in wages. Basic pay growth slowed to 2.6 per cent from 2.7 per cent, falling short of economists’ expectations.

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