It came as no surprise that the Federal Reserve left rates unchanged last week. Future rate hikes are likely to remain off the cards for the foreseeable future, at least until inflation rises above 2% and remains above this level for some time, a situation which is unlikely to occur until 2023. The picture in the US is looking a little rosier than first thought, although still in contractionary territory, GDP has been revised from -6.5% to -3.7%. However, the spectre of unemployment and softening data means that growth for 2021 has been revised down from 5% to 4%.
There was also no change at the Bank of Japan, who left rates unchanged. The new Prime Minister, Yoshihide Suga has pledged to remain accommodative and will be ready to introduce further monetary easing if required, but for now, will follow the current expansionary policy set out by Shinzo Abe.
In the UK the Bank of England has shifted its focus to the real threat of a ‘no deal’ Brexit, with preparations for this outcome now underway. Relations between the UK and EU have soured since the Internal Market Draft bill, which contravenes international commitments. This deterioration in communication has also had a knock-on effect on the Bank of England outlook for growth and inflation. Interest rates remain unchanged.
Global equity markets continued in their erratic fashion last week, although to a lesser extent; volatility as measured by the CBOE VIX index also moved lower, although was short-lived, spiking up to over 30 at time of writing, as a result of losses early this morning.
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