In a statement after its two-day meeting last week, the Federal Reserve (Fed) said that it is “closely monitoring global economic and financial developments” while “assessing their implications for the labour market and inflation, and for the balance of risks to the outlook”.
The Fed in effect opened the door to a change in its outlook for the economy this year, and possibly a slower pace of interest rate hikes that would make a change in March less likely.
The US central bank had to acknowledge diminishing expectations of global growth that have resulted in a sharp stock market sell-off, while avoiding giving any hints on the timing of the next increase rate increase.
In the meantime, economic confidence in the eurozone unexpectedly fell to a five-month low in January as the global stock market turmoil and slowdown in China weighed on sentiment across all sectors.
A survey carried out by the European Commission showed last week that the economic confidence index dropped to 105 in January from a revised 106.7 in December. The gauge was forecast to fall marginally to 106.4. This was the lowest reading since August, when it was 104.
European Central Bank president Mario Draghi has held out the prospect of an even looser monetary policy as early as March to nurture growth and bring inflation back in line with the bank’s target of just under two per cent.
Finally, in the last three months of 2015, the UK economy expanded by 0.5 per cent on the previous quarter, up from the 0.4 per cent growth it registered in the third quarter and in line with expectations.
The dominant service sector advanced 0.7 per cent, while production and construction contracted by 0.2 per cent and 0.1 per cent respectively. The agriculture sector grew by 0.6 per cent.
On a yearly basis, GDP climbed 1.9 per cent in the fourth quarter, in line with expectations. However, that was the weakest growth rate in nearly three years as the global economic slowdown weighed on its previously rapid expansion. In 2015 as a whole, GDP increased by 2.2 per cent on 2014.
This report was compiled by Bank of Valletta plc for general information purposes only.