In its scheduled two-day meeting that ended last Wednesday, the Federal Reserve (Fed) kept its benchmark short-term interest rate unchanged at its record low of 0 to 0.25 per cent, where it has been since December 2008.
However, Fed officials significantly raised the likelihood of a rate hike in December by dropping previous references to the weaknesses of the global economy from the policy statement issued at the end of the meeting.
Fed policymakers have been saying for months that they believed the economy was nearing the point where it could tolerate an increase in rates.
Stock markets rallied after the decision, as investors took the comments by the Fed as a vote of confidence in the economy.
In the meantime, preliminary estimates released last week by the Office for National Statistics (ONS) showed that UK economic growth eased more than expected in the third quarter as GDP rose by 0.5 per cent from the second quarter, when it grew 0.7 per cent. Economists had predicted a 0.6 per cent economic expansion.
Growth was 2.3 per cent higher than the same quarter last year, compared with a forecast for it to maintain the second quarter’s 2.4 per cent rate of growth, and the smallest increase in two years.
Britain’s economy was the fastest growing in the G7 group of developed economies in 2013 and 2014 but the latest figures raise the chances that a period of rapid economic growth is coming to an end.
Finally, the Conference Board’s Leading Economic Index, a measure of future economic activity in the eurozone, remained unchanged at 108 (2010 = 1,000) in September, survey figures from the board showed last week. This followed a 0.2 per cent increase in August and a 0.3 per cent increase in July. The index’s rate of increase has slowed in recent months, suggesting that economic activity is unlikely to accelerate in the coming months.
This report was compiled by Bank of Valletta plc for general information purposes only.