Citing a more modest outlook for the US economy, the Federal Reserve monetary policy committee last week held interest rates unchanged and signalled that it did not plan to increase rates at all this year and might raise them just once in 2020.

“The US economy is in a good place,” Fed Chairman Jerome Powell said at a news conference after the meeting, adding that policymakers foresee “a modest slowdown, with overall conditions remaining favourable”. The move comes after the central bank repeatedly telegraphed its plan to scale back rate hikes in 2019 in the face of a US and global economic slowdown and financial markets that have shown no tolerance for higher borrowing costs in that environment.

In the meantime, in Germany, a respected panel of economists said last week that slower exports and acute capacity limits had prompted them to lower their growth forecast for Europe’s largest economy, with a chaotic Brexit a further risk to their outlook.

Output is expected to grow by just 0.8 per cent this year, according to the five-strong “wise men” group – which in actual fact includes one woman – about 0.7 percentage points lower than their previous forecast.

“Significantly weaker export demand from key markets” was one dampener on economic growth, the experts found, with “capacity constraints and existing labour shortages in many sectors” weighing on the supply side.

Finally, in the UK, amid intensifying uncertainty over the country’s departure from the European Union, the Bank of England (BoE) kept its benchmark interest rate and bond purchase programme un­changed and reiterated that a further tightening of policy at a gradual pace may be needed if the economy expands in line with projections.

The nine-member Monetary Policy Committee, led by BoE Governor Mark Carney, held the key interest rate unchanged at 0.75 per cent, in line with economists’ expectations.

The central bank reiterated that rates could move in either direction if there is a no-deal Brexit, with many fearful that the so-called “cliff-edge” scenario could severely hit economic growth and employment in the world’s fifth-largest economy.

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

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