In its latest round of macroeconomic projections, the European Central Bank raised the euro area growth forecasts, as it gained confidence from the strong momentum in the current year, but inflation was seen to remain short of its target into 2020. The ECB’s economic growth outlook for next year was sharply revised up to 2.3 per cent from 1.8 per cent. The 2019 projection was raised to 1.9 per cent from 1.7 per cent. The latest forecasts confirmed that the bank is feeling increasingly optimistic. At a press conference, ECB president Mario Draghi said that the desire of some Governing Council members to signal an end to asset purchases is far from a consensus view.

In the last monetary policy meeting for this year, the US Federal Reserve delivered a much anticipated interest rate hike and raised its forecast for economic growth in 2018, even as it stuck with a projection for three hikes in the coming year. The 7-2 vote for the rate hike, the Fed's third this year, raises the benchmark lending rate by a quarter of a percentage point to a target range of 1.25 per cent to 1.5 per cent. In another move that could tighten monetary conditions, the Fed confirmed it would step up the monthly rate of balance sheet reduction to $20 billion beginning in January from $10 billion.

In the UK, inflation reached 3.1 per cent in November, data from the Office for National Statistics (ONS) showed. Inflation rose to 3.1 per cent from three per cent in October and the highest level since March 2012. Economists’ forecasts called for a three per cent inflation reading. On a monthly basis, consumer prices rose by 0.3 per cent. The ONS said that airfares and computer games contributed to the increase. Average weekly wages are growing at just 2.2 per cent.

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