Europe, US, and UK central banks hike interest rates. It has been a busy week for the major central banks, as the European Central Bank (ECB), the US Federal Reserve (Fed) and the Bank of England (BoE) all hiked their respective key interest rates. As widely anticipated, the ECB on Thursday, raised interest rates by half a percentage point to three percent, as concerns mount that inflation will remain high despite the recent fall in energy prices. Thursday’s hike was in line with what the bank had projected in December and with market expectations. One the same day, the BoE’s rate-setting Monetary Policy Committee also decided to raise its benchmark interest rate by half a percentage point to four percent, its 10th consecutive increase. The move was also broadly expected. The bank signaled however, that inflation had probably peaked. The Fed also raised interest rates but by a lesser quarter percentage point on Wednesday, its eighth increase in less than a year, as the central bank continues to battle inflation. The Fed's move was widely anticipated and marked the second time in a row that it slowed its increases, bringing its benchmark interest rate to a range of 4.5 - 4.75 percent.
IMF sees ‘turning point’ for world economy as growth bottoms out. In its global outlook for 2023, the International Monetary Fund (IMF) forecasts a “turning point” for the global economy as it raised its growth outlook for the first time in a year, with resilient US spending and China’s reopening supporting demand amid a growing background of risk. Growth for 2023 was revised up by 0.2 percentage points to 2.9 percent, the IMF said in its World Economic Outlook Update, released on Tuesday. Nonetheless, this was weaker than an estimated 3.4 percent growth in 2022, which was also revised up by 0.2 percentage point. IMF Chief Economist Pierre-Olivier Gourinchas however warned that “the risks to the outlook remain on the downside,” with the possibility of China’s recovery stalling, central bank monetary tightening due to continued elevated inflation, an escalation of the war in Ukraine and a sudden repricing in financial markets.
Italy's economy contracts by 0.1 percent in the fourth quarter, raising recession fears. After growing for seven consecutive quarters, the Italian economy shrank marginally in the fourth quarter of 2022, amid weaker domestic demand and lackluster industrial and farm sector performance, initial data from the statistical office Istat showed on Tuesday. Italy’s economy shrank by 0.1 percent, a slightly smaller contraction than expected, but still triggering recession fears. On a year-on-year basis, fourth quarter gross domestic product in the eurozone’s third largest economy was up by 1.7 percent, national statistics bureau ISTAT said. Looking ahead, the outlook has been clouded by high inflation and exorbitant energy costs, exacerbated by the war in Ukraine, which have sapped business and consumer confidence, hampered investments and negatively affected families' spending power.
UK mortgage approvals fall to lowest level in two years. UK approvals for home loans fell to their lowest level in two years as higher interest rates discouraged buyers, fresh data published by the BoE show. The bank said that 46,075 new loans for house purchases were approved in November, representing a reduction from the 58,997 the month before and the least since June 2020 when the country was in lockdown. Economists had expected 53,000 approvals. The sharp drop underlined the turmoil in the UK housing market, as a consequence of the “mini” Budget in late September of then-prime minister Liz Truss, which prompted some lenders to withdraw home loans.
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