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BOV Market Watch - Week ending 16th July 2021
16 Jul 2021

US economy is strengthening, Fed’s Beige Book finds. The Federal Reserve’s latest Beige Book, that gathers anecdotal information on the current state of the economy, confirmed that the US economy was growing faster through early July, but the recovery is being restrained by widespread shortages of labour and supplies. Prices were also strong, rising "at an above-average pace," the Fed said, with its business contacts apparently uncertain that higher inflation would fade soon. Overall, the US economy was described as displaying "moderate to robust growth," marking the report's most optimistic overall characterisation of the economy since early 2018. However, it noted a heightened sense of concern among businesses that the supply chain disruptions that have become a feature of the economy's reopening from Covid-19-related shutdowns would persist for longer than officials had predicted.

UK inflation jumps more than expected in June. Inflation in Britain surged further above the Bank of England's (BOE) target in June to reach 2.5 percent, its highest reading since August 2018, increasing speculation that the BOE will have to consider sooner whether to taper its massive stimulus programme. Prices for food, fuel, second-hand cars, clothing and footwear rose as the economy bounced back from its lockdown slump, the Office for National Statistics said. Economist had predicted headline inflation to inch up to 2.2 percent from May's 2.1 percent, and comes on the heels of a report that showed US inflation hitting its highest in 13 years at 5.4 percent. Core inflation, that excludes energy, food, alcoholic beverages and tobacco, advanced to 2.3 percent in June from two percent in May.

China’s economic growth moderates in the second quarter. China reported second-quarter gross domestic product (GDP) growth that came in slightly below expectations. The country’s GDP increased by 7.9 percent in the second quarter from the same quarter last year, the National Bureau of Statistics said on Thursday. That fell short of economists’ average estimate of 8.1 percent growth for the April to June period. Second-quarter GDP rose by 1.3 percent from the first quarter, faster than the 0.6 percent pace seen between the first quarter of this year and fourth quarter of 2020. However, the latest quarterly increase was still slower than the 2.6 percent pace of the fourth quarter. “Overall, China’s economy looks to be on track for recovery, with the government’s six percent annual growth goal within reach,” Chaoping Zhu, global market strategist at JPMorgan Asset Management, said in a note.

BoJ keeps policy rate; cuts fiscal 2021 growth outlook. The Bank of Japan decided to maintain its monetary stimulus unchanged and unveiled a preliminary outline for the new programme to support efforts on climate change. The bank also lowered its near-term growth outlook citing the impact of the pandemic and raised its fiscal 2021 inflation forecast. The board, governed by Haruhiko Kuroda, on Friday, voted 8-1, to hold the interest rate at -0.1 percent on reserves that financial institutions hold at the central bank. The bank will continue to purchase a necessary amount of Japanese government bonds without setting an upper limit so that 10-year JGB yields will remain at around zero percent. The bank also provided a preliminary outline for a new-funding programme to support efforts in fields related to climate change. The bank plans to launch the measure this year and to continue until March 2031.

 

 

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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).