The US Federal Reserve said it would start trimming its $4.5 trillion balance sheet in October by allowing $10 billion in bonds to mature without replacing them. The amount of reductions will gradually increase to maximums of $30 billion per month for treasuries and $20 billion per month for agency securities, and will remain in place through the process of normalising the size of the Fed’s balance sheet. Policymakers maintained its benchmark interest rate at a range of one per cent to 1.25 per cent.

The Fed restated that interest rates are expected to rise at a “gradual” pace; however, recent predictions indicated that officials see the path as less steep than before.

The European Central Bank (ECB) reported that the eurozone current account surplus increased in July but the annualised surplus remained on a downward trend.

The current account surplus improved to a seasonally adjusted €25.1 billion in July from €22.8bn in June. The surplus on trade in goods fell to €26.4 billion from €28.1bn in the previous month, while the surplus on services increased to €2.6 billion from €2.4bn.

In July, the eurozone had a surplus in goods, services, and primary income, while booking a deficit in secondary income. In the 12 months to July, the eurozone’s current account surplus fell to 3.0 per cent of GDP from 3.5 per cent a year earlier, confirming the ECB’s expectation of a narrowing gap in 2017.

UK retail sales rose at their fastest pace in four months in August as consumers spend more despite higher inflation.

The Office for National Statistics stated that UK retail sales grew by one per cent in August compared with the prior month, with sales of clothing and non-essential items reported as strong. The reading was the highest in four months and exceeds forecasts of 0.2 per cent and July’s rise of 0.6 per cent. On a yearly basis, UK retail sales volume were 2.4 per cent higher in August from 1.4 per cent. Economists had forecast a 1.2 per cent increase.

Retail sales figures indicate that consumers are showing remarkable resilience in the face of squeeze on wages which have not been rising as fast as inflation.

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