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BOV Market Watch - Week ending 17th December 2021
17 Dec 2021

Federal Reserve to withdraw stimulus more quickly. Citing inflation developments and further improvement in the labour market, the Federal Reserve (Fed) on Wednesday announced its widely expected decision to accelerate the pace of reductions to its asset purchases programme, known as quantitative easing    . The US central bank had already announced it was tapering off the monthly support, introduced to bolster the economy during the pandemic. The Fed said it has decided to reduce the monthly pace of its net asset purchases by $30 billion per month, double the previously announced $15 billion per month. The move opens the door to interest rate rises in 2022. "Economic activity is on track to expand at a robust pace this year, reflecting progress on vaccinations and the reopening of the economy," Fed chair Jerome Powell said.

ECB slows pace of stimulus. In its last monetary policy meeting for this year, the European Central Bank (ECB) said on Thursday it will end emergency bond buys next March but temporarily double the pace of its longer-running Asset Purchase Programme to ease the transition. The bank also maintained its forward guidance on interest rates and asset purchases, which some had expected to be tweaked. With the eurozone economy near its pre-pandemic size, pressure is mounting on the bank to follow its global peers in turning off the stimulus, but any abrupt move would risk unravelling years of effort to rekindle once-anaemic inflation. "We need to maintain flexibility and optionality in the conduct of monetary policy," ECB President Christine Lagarde told a news conference. "The spread of new coronavirus variants is creating uncertainty."

UK interest rates rise for first time in three years. In its first increase in more than three years, the Bank of England raised interest rates from 0.1 percent to 0.25 percent, saying that the risks of inflation required pre-emptive action even as the UK is engulfed by the Omicron wave of coronavirus. Surprising financial markets on Thursday for the second consecutive month and voting 8-1 in favour of higher interest rates, the bank’s Monetary Policy Committee decided it could no longer wait before trying to cool spending in the economy. “We’ve seen evidence of a very tight labour market and we’re seeing more persistent inflation pressures,” said Andrew Bailey, BoE governor, after the monetary policy meeting.

UK unemployment rate falls; job vacancies rise to record high. Unemployment in the UK fell in October despite the end of the furlough scheme, as companies continued to hire amid record numbers of vacancies. The Office for National Statistics (ONS) reported on Tuesday that the unemployment rate dropped 0.4 percentage points from the previous three months to 4.2 percent during August through October. The rate came in line with economists' expectations. Reflecting a continued recovery in the labour market after the end of the government’s multibillion-pound job support scheme in September, the ONS said the number of workers on company payrolls rose by 257,000 in November from a month earlier - the largest monthly rise in payroll employment on record dating back to 2014. Data also showed that the number of job vacancies continued to rise to a new record of 1,219,000 in September to November period.

China industrial growth improves. China's industrial production growth accelerated in November as the disruption caused by the power shortages eased, while the retail sales growth weakened amid an outbreak of the new variant of coronavirus. The National Bureau of Statistics (NBS) announced on Wednesday that major enterprises' industrial added value expanded 3.8 percent year-on-year in November. The growth rate was up 0.3 percentage points compared with the previous month. As in October, however, strength was concentrated in the mining and power sectors, which continue to rebound steadily after the relaxation of safety and environment-related curbs that forced widespread power outages in the early autumn.

 

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Bank of Valletta p.l.c. is a public limited company regulated by the MFSA and is licensed to carry out the business of banking and investment services in terms of the Banking Act (Cap. 371 of the Laws of Malta) and the Investment Services Act (Cap.370. of the Laws of Malta).