The Federal Reserve raised US short-term interest rates for the third time this year. At the same time it left intact its plans to steadily tighten monetary policy, as it forecast that the US economy would enjoy at least three more years of growth.

The Fed decided to raise the target range for the federal funds rate to two to 2.25 per cent, citing realised and expected labour market conditions and inflation.

Growth and job gains have been “strong” and inflation remains near the central bank’s two per cent target, the Federal Open Market Committee said in its statement last Wednesday following a two-day meeting in Washington.

Meanwhile, survey data from the European Commission showed last week that economic confidence in the eurozone dropped for a ninth month in September, the longest losing streak since 2011, as rising protectionism and Italian political uncertainty cast a cloud over the economic mood in Europe. The economic sentiment index dropped to 110.9 in September from 111.6 in August. Economists had forecast that the index would fall to 111.2.

The decrease in sentiment was caused by lower confidence levels in the industry sector and among consumers, which were only partially offset by increases in the retail trade and construction sectors.

Finally, the World Trade Organisation (WTO) last week downgraded its forecast for global trade for this year and next, citing escalating trade tensions around the world. The growing trade war between the world’s two largest economies, the US and China, was mentioned as the main reason for reducing 2018’s trade growth projections by half a percentage points to 3.9 per cent. Next year, trade growth is expected to slow further, to 3.7 per cent, according to the WTO.

The WTO called on the world’s two largest economies to “work through their differences” as it warned that rising global trade tensions could threaten job creation and living standards.

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