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BOV Market Watch - Week ending 17th June 2022
17 Jun 2022
Federal Reserve raises interest rates by most since 1994. The Federal Reserve (Fed) on Wednesday launched its biggest assault yet against spiralling inflation, raising the benchmark interest rates by three-quarters of a percentage point, the most aggressive hike since 1994. The Fed raise the target rate for the federal funds rate by 75 basis points to 1.50 to 1.75 percent. As monetary policymakers drive their interest rates higher, they will make buying a home or expanding a business more expensive, restraining spending and slowing the broader economy. The central bank expects growth to moderate in the coming months and years and predicted that unemployment will rise about half a percentage point to 4.1 percent by late 2024 as tighter monetary policy dampens economic growth.

Eurozone industrial production rose in April. Industrial production in the eurozone increased in April, partly offsetting a decline from the previous month, as factories across the region continue to struggle with supply bottlenecks and high costs. Industrial output in the countries that share the euro currency rose by a marginal 0.4 percent month-on-month in April, reversing a 1.4 percent fall in March, as the production of energy rose by 5.4 percent, intermediate goods by 0.7 percent, non-durable consumer goods by 0.4 percent and durable consumer goods by 0.2 percent, while production of capital goods fell by 0.2 percent. The small increase in industrial production in April leaves the industry vulnerable to a decline in the second quarter as supply chain issues and weakening demand hit the headlines again.

German inflation reaches another all-time high. German inflation hit another all-time high, putting more pressure on the European Central Bank’s (ECB’s) exit from the crisis-era stimulus after numbers from Spain also topped economists’ estimates. Germany's inflation rate reached 7.9 percent in May, according to data published by the German statistical agency Destatis. May's inflation was thus up by roughly one-tenth over the already record-breaking rate in the previous month. The report came just days before a crucial ECB meeting where officials confirmed plans to raise interest rates for the first time in more than a decade in July.

Bank of England lifts rates to highest since 2009. The Bank of England raised interest rates by 25 basis points on Thursday, ignoring pressure for a bolder move to curb price increases that have pushed inflation to a 40-year high. The bank’s Monetary Policy Committee voted 6-3 to increase the Bank Rate to 1.25 percent, with the three dissenting members voting for a 50 basis point hike to 1.5 percent. The Bank stated that rising energy prices were expected to drive living costs even higher in October but added it would "act forcefully" if necessary should inflation pressures persist. Some economists speculate that the Bank could eventually have to raise interest rates to three percent. Headline inflation spiked to nine percent in April from seven percent in the previous month, far above the central bank's target of two percent.

Australia’s unemployment remains at 3.9 percent, as labour market keeps strengthening. Australia’s unemployment rate stood at 3.9 percent in May 2022, down by 1.2 percent when compared to the same period last year, according to the latest report from the Australian Bureau of Statistics. When compared to the previous month, the unemployment rate remained unchanged. The latest monthly figures estimate 60,600 extra people were employed in May, driven entirely by full-time jobs. The number of people considered officially unemployed increased by 7,800, as more people entered the labour force. The implied strength in labour market means that the Reserve Bank of Australia still has a long way to go to bring rates out of their current accommodative level, and labour market tightness is likely to get more, rather than less extreme as they make that transition.
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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).