The US Federal Reserve policy­makers last week voted against a rise in interest rates. However, the Fed signalled that it still expects to raise interest rates twice this year.

In its previous meeting held in April, the Fed had favoured an increase in interest rates in June, though May’s jobs sharp slow­down, low inflation and geo­political headwinds were factors the Fed could not ignore.

Though US economic growth continues to strengthen, the rate of improvement in the labour market had diminished and “business fixed investment has been soft”.

In May, the US economy added only 38,000 jobs.

The Fed lowered its 2016 GDP forecast to two per cent this year from 2.2 per cent previously. It seems unlikely that inflation will rise to the Fed’s two per cent target by the end of 2018.

In the meantime, statistics published last week by Eurostat showed that eurozone employment increas­ed at a steady rate for the second consecutive quarter in the three months ended March. The number of employed people in the region increased by 0.3 per cent, the same rate of increase as in the preceding two quarters. Eurostat estimates show that there were 152.6 million employed in the eurozone. This was the highest level since the fourth quarter of 2008. Employment in construction increased by 0.2 per cent while employment in manufacturing rose by 0.1 per cent over the quarter. On annual basis, employment rose by 1.4 per cent in the first quarter, up from the 1.2 per cent in the previous period.

Finally in the UK, according to figures published by the Office for National Statistics (ONS) showed that British house price inflation slowed for the first time in eight months in April. The UK house price index rose by 8.2 per cent year-over-year in April, marginally lower than the previous month’s 8.5 pr cent increase. The average UK house price reached £209,000 in April, which was £16,000 higher when compared to April 2015. The ONS said that London remained the region with the highest average house price at £470,000.

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

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