Key highlights of the week ended July 17

Note: This section contains information in English only.
Source: Dukascopy Bank SA
Euro zone
European leaders unanimously reached a third bailout deal for Greece, worth up to 86 billion euros, while the ECB raised its emergency-lending ceiling to Greek banks by 900 million euros, putting the total amount of ELA at nearly 90 billion euros. The decision to increase ELA came after the Greek parliament voted in favour of austerity reforms on Wednesday, therefore allowing the Greek banks to open as soon as on Monday. Nevertheless, capital controls will stay in place and limit the amount of money Greek people can withdraw. In the meantime, for the eighth consecutive meeting, the Governing Council decided to keep the key refinancing rate at 0.05%, the deposit rate at negative 0.2%, while the marginal lending rate at 0.3%. Nonetheless, the ECB believes that it can sustain inflation rates close to 2% in the medium-term by fully implementing all of its monetary policy measures.

UK
BoE Governor Mark Carney hinted that UK interest rates could rise "at the turn of the year", adding that any lift in borrowing costs would be gradual and would not reach the pre-crisis level. Carney said he expected interest rates to rise over the course of next three years from the current level of 0.5%. Carney's comments puts the UK central bank on track to follow the US Fed by hiking interest rates in the near future, after more than six years at record-low levels amid the fallout of the global financial crisis.

Canada
The BoC trimmed its benchmark overnight interest rate by 25 basis points to 0.50%, amid a more severe than expected effect of the sharp drop in oil prices and a weak recovery in non-energy sector. The central bank also downgraded its growth estimate compared to its April projection. The economic output is expected to have contracted modestly in the first half of the year, leading to higher excess capacity and additional downward pressure on inflation. However, the BoC predicts growth to resume in the three months through September and to exceed potential in the fourth quarter, supported by the non-resource sectors of the economy. The central bank now forecasts Canada's GDP to increase by just over 1% in 2015 and around 2.5% in the subsequent two years. According to the BoC's estimates, the economy will return to full capacity and inflation to 2% on a sustained basis in the beginning of 2017.

Japan
The BoJ decided to keep its current monetary settings unchanged, albeit it downgraded its economic growth outlook for fiscal 2015.At the same time, the central bank downgraded its GDP forecast to 1.7%, compared with its 2% growth outlook in April. Japan's economy likely entered a soft patch amid sluggish exports and household spending, though economists forecast growth to pick up in the July-September quarter as rising wages underpin consumption. In addition to that, the BoJ trimmed its 2015 inflation forecast to 0.7%, down from 0.8%. The estimate for fiscal 2016 was slashed to 1.9%, while for fiscal 2017 to 1.8%, down from 1.9%. While many analysts doubt consumer prices growth will accelerate quickly, the BoJ policy makers are confident a solid economic recovery will help drive inflation to 2% by around September next year.

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