Key highlights of the week ended March 18

Note: This section contains information in English only.
Source: Dukascopy Bank SA
US
The Fed eased monetary policy, not by cutting interest rates, but through words. In line with analysts' expectations, the US central bank held interest rates steady. The Fed noted that moderate growth of the US economy and robust job gains would allow it to tighten policy this year. However, instead of four rate hikes expected earlier, now fresh projections showed policy makers expected two quarter-point lifts by the end of the year. The US economy continues to face headwinds from an uncertain global economy, the US central bank admitted. Fed officials anticipated weaker economic growth and lower inflation this year. Fed Chairwoman Janet Yellen also said that the US economy is expected to grow just 2.2% this year, down from 2.4% in December, due to weaker global growth.

Japan
The BoJ kept monetary policy unchanged, after adopting a negative interest rate strategy in January in a bid to underpin inflation and create a virtuous spending cycle. The central bank offered a bleaker view on the world's third biggest economy and warned of waning inflation expectations, noting that global headwinds may justify introducing more stimulus ahead. In line with expectations, the BoJ kept its pledge to expand base money at an annual pace of 80 trillion yen. It also left unchanged a 0.1% negative interest rate it applies to some reserves parked by financial institutions at the central bank.

UK
The BoE's rate-setting committee voted unanimously to keep interest rates on hold at 0.5% and the size of its bond portfolio at 375 billion pounds. It was the second month in a row policy makers were unequivocal on the decision, after Ian McCaffery, an external member of the Monetary Policy Committee, abandoned his rate hike vote in February referring to a weaker outlook for wages. Despite an increased level of uncertainty and sluggish global demand, policy makers said interest rates were likely to rise rather than decrease in the future to ensure inflation returns to its official target of 2% "in a sustainable fashion," according to the Monetary Policy Committee minutes. 

Switzerland
The SNB kept interest rates unchanged at a record low and reiterated its pledge to intervene in currency markets to weaken the Franc, which remains significantly overvalued. The SNB held a key deposit rate at –0.75% despite the expanded stimulus programme from the European Central Bank, which may eventually put upward pressure on the Swiss currency versus the Euro. The central bank also kept its target range for the three month London interbank offered rate at –1.25% to –0.25%. The SNB revised downwards its forecast for the Swiss economy to expand this year of between 1% and 1.5%, compared with its December's estimate of a 1.5% growth rate. In addition, the central bank said that while it predicts consumer prices to decline again this year by 0.8%, the Swiss economy should emerge from several years of deflation in 2017. The SNB anticipates consumer price inflation to climb 0.1% next year and 0.9% in 2018.

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Mon, 21 Mar 2016 06:35:04 GMT

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