In her testimony to the House Financial Services Committee, Janet Yellen, the new chairman of the US Federal Reserve (Fed), pledged to maintain her predecessor’s monetary policy by scaling back the massive stimulus programme in “measured steps”, and signalled that she will firmly stick to that plan. Only a “notable change in the outlook” for the economy would prompt policymakers to change the course of tapering, Yellen said.
She also declared that the unemployment rate alone isn’t an adequate measure of labour market health. She spoke days after a report showed that the jobless rate unexpectedly declined close to the level where the Fed had said it would be prompted to consider increasing its benchmark interest rate.
In the meantime, Bank of England (BOE) Governor Mark Carney repeated his pledge to maintain interest rates at a record low and reshaped the bank’s forward. Carney had set a seven per cent jobless level to consider an interest-rate increase when he introduced guidance in August. The BOE has now abandoned its link to unemployment data in favour of a broader range of economic indicators.
In the meantime, the bank also lifted its growth forecast for the UK’s economy this year from 2.8 per cent to 3.4 per cent. While unemployment has fallen faster than officials expected, prompting questions about the policy’s credibility, the BOE is maintaining its push to convince households and businesses that higher interest rates are still some way off.
Finally, according to flash estimates by Eurostat, during the fourth quarter of 2013, GDP rose 0.3 per cent in the eurozone and by 0.4 per cent in the EU compared with the previous quarter.
On a country level, the German and French economies grew at a similar pace in the final quarter of 2013, bridging the gap seen in recent quarters between the eurozone’s two largest economies, as investment picked up in both regions. The return to growth for the French economy means the nation has managed to escape falling back into recession.
This article was compiled by Bank of Valletta for general information purposes only.