The US Federal Reserve on Wednesday kept rates unchanged at the 0%-0.25% level and reiterated its statement that the current economic situation will likely warrant exceptionally low levels of interest rates for an “extended period”.
In the ensuing press conference, Fed chairman Ben Bernanke confirmed that it will end its $600 billion quantitative easing programme by the end of this month and that it will continue to reinvest principal repayments on mortgage-backed securities and Treasuries.
New orders for US manufactured goods rose in May, easing fears of a sharp slowdown in factory activity. Durable goods orders increased by 1.9% last month after dropping, a revised, 2.7% in April. May’s figure beat economists’ expectations of a 1.5% rise.
Activity in the euro area’s services and manufacturing sectors slowed more than expected during June. Growth in the area’s dominant services sector was slower than that registered in recent months, with the Purchasing Managers’ Index (PMI) falling to 54.2 from the 56 in May.
This was the lowest level since last December and was below expectations of a 55.5 reading.
In the manufacturing sector, the PMI registered its lowest level since December 2009 and was also much lower than expectations. The index here fell to a level of 52 from the 54.6 registered the previous month.
In the UK, meanwhile, the minutes from the latest meeting of the Monetary Policy Committee (MPC) of the Bank of England showed that policymakers warned of a possible need for a second round of quantitative easing as the outlook for the country’s economy has become gloomier.
Two of the nine members of the MPC still voted for an interest rate increase in order to address Britain’s inflation problem.
However, the overall balance shifted to a more dovish stance. Most members judged that weak growth will probably last longer than originally thought on the back of weak activity indicators, stagnant consumer demand and Greece’s fiscal crisis.
This article was compiled by Bank of Valletta plc for general information purposes only.