The minutes from Federal Reserve’s July policy meeting show that some voting policymakers anticipate that a US interest rate hike will be required soon, though there is general consensus that more data is needed. The main issues are inflation, jobs and foreign markets.
An interest rate hike in September is unlikely as the Fed had already highlighted its concerns that inflation is below the two per cent target. The Fed has also acknowledged that growth in employment was strong but slower than in the first quarter. On the international scene, the Fed recognised global risks, mainly arising from the Brexit referendum.
In the meantime, Britain’s inflation climbed to its highest level of 2016 due to the fall in sterling in the wake of the Brexit referendum. The currency’s fall pushed retail prices up in July at a faster rate than was expected by analysts. The Consumer Price Index (CPI) picked up to 0.6 per cent from 0.5 per cent in June.
Separate figures from the Office for National Statistics (ONS) shows that the jobless rate held steady at the lowest level since 2005 and the employment rate increased to a record high despite fears that a Brexit vote would trigger widespread job losses. The unemployment rate remained at 4.9 per cent in the three months June, the same rate as seen in the three months to May. The ONS also reported that the number of jobless people dropped by 52,000 from the previous quarter to 1.64 million.
Finally, German investor confidence recovered partially in August as the shock over the Brexit vote began to wear off. The ZEW Indicator of Economic Sentiment surged by 7.3 points, recovering from -6.8 in July to 0.5 in August. A score of 2 was estimated by economists.
A gauge for Germany’s current economic situation increased by 7.8 points to 57.6 in August. This exceeded economists’ projections of a 50.2 score. The ZEW survey also showed that eurozone investor sentiment improved by 19.3 points to a score of 4.6, from -14.7. The current conditions index rose by 2.1 points to read -10.3.
This report was compiled by Bank of Valletta plc for general information purposes only.