The Federal Reserve raised its benchmark interest rate for the fourth time since 2008, and it signalled another rate hike by the end of the year. The Federal Open Market Committee (FOMC) said it is targeting a range between one per cent and 1.25 per cent for overnight borrowing.
Federal Reserve officials also announced that they intend “this year” to begin reducing the $4.5 trillion in Treasury and mortgage securities and other assets the central bank built up during the financial crisis and in the years after. Fed chairwoman Janet Yellen said they are expecting that the ongoing strength of the US economy will warrant gradual increases in the federal funds rate to sustain a healthy labour market and price stability.
In the meantime, data published by Eurostat showed that employment hit a record high in both the eurozone and the 28 countries that form the EU during the first quarter of 2017. On a seasonally adjusted basis, the number of employed people amounted to 154.8 million for the eurozone and 234.2 million in the EU28, the highest figures ever. On a quarter-on-quarter basis, the employment figure rose by 0.4 per cent in both regions. In the last quarter of 2016, the number of employed people grew by 0.4 in both the eurozone and EU28. On an annual basis, employment increased by 1.5 per cent in the eurozone and 1.4 per cent in the EU28. The highest increases were recorded in Estonia, Malta, Sweden and Ireland, while the largest declines were seen in Latvia, Romania, Croatia and Lithuania.
Finally, in Germany, inflation fell sharply in May, well below the European Central Bank’s target for the eurozone of two per cent. Inflation in Europe’s largest economy declined from two per cent in April to 1.5 per cent in May, the lowest since November 2016, when the rate was 0.8 per cent. In the meantime, Germany’s central bank, the Bundesbank, cut its inflation forecasts for 2018 and 2019 to 1.4 per cent and 1.8 per cent respectively, while pushing up its estimates for this year to 1.5 per cent. Its previous estimates put price growth at 1.4 per cent this year, 1.7 per cent for next year and 1.9 per cent in 2019.
This report was compiled by Bank of Valletta plc for general information purposes only.