As described before, during the last week, three of the major central banks of the world have had to decide what to do about interest rates.
The market expectations were confirmed in all three cases: the interest rates are unchanged for the Bank of Japan, Bank of England and Federal Reserve.
Federal Reserve’s decision, a step away from the election of the President of the United States, has been the most anticipated. The statements made later represented the last useful opportunity to provide some more information to the market on the debate concerning the interest rates and the expected rise promised throughout 2016.
It’s been almost a year since the last vote in favor of a change in interest rates by the FOMC members. The market hopes that Janet Yellen will announce a rising of interest rate during the December meeting.
After the announce about the interest rates unchanged, it was later published a reports revealing that ‘measured economic improvements so far, have not yet considered sufficient to justify a further tightening monetary policy.’
The market movers that affected the United States this week were also the trade balance and the non-farm payrolls.
The US trade balance surprised positively analysts’ expectations with a balance which marks a deficit of 36,44 billion dollars against 40,46 billion reported in the previous month.
The data on new jobs in the United States rather disappointed analysts’ expectations (161.000), but wages were higher (+ 0,4%) and the unemployment rate decreased (4,9%).
The non-farm payrolls (the number of new jobs excluding the agricultural industry) added to the economy in October resulted below market forecasts (191.000).
Last week was also published the European Central Bank’s economic bulletin showing a renewed pessimism on the inflation path. The rise in consumer prices, according to the ECB’s analyst team, does not seem to be convincing.
The data confirm the moderate but steady growth of the economy of the Eurozone. The economic outlook remains vulnerable to risk factors, underlining again the inherent weakness in the Eurozone economic model.
As for the figure for the Eurozone PMI services of the month of October, the index of purchasing managers in the service industry dropped to 52,8 (consensus and previous data was 53,5). The composite index amounted instead at 53.3 (consensus and previous was 53,7).
No such problems seem to exist for the Bank of England that decided to leave interest rates unchanged at 0.25% and quantitative easing. BoE decided also to revise upwards its economic growth forecasts for 2016 and for 2017.
Although the growth estimates are rather optimistic, the Bank of England appears concerned about the unemployment problem. There is a risk, according to the BoE, that uncertainty of the post-Brexit could push unemployment to increase.
The Bank of England, by the way, was in the spotlight in the past week since some rumors started to circulate about the possible resignation of its Governor in 2017. These rumors were later denied by the same Mark Carney who confirmed that he will remain in office until 2019.