Key highlights of the week ended May 6

Source: Dukascopy Bank SA
US
Atlanta Federal Reserve President Dennis Lockhart said that the UK's referendum on whether to leave the EU could "loom large" as the Fed weigh whether to hike interest rates at its next policy meeting. Lockhart underlined that Brexit could potentially lead to heightened global uncertainty. Yet, the policy maker added that the US economy could warrant a rate hike when the Federal Open Market Committee meets on June 14-15. Lockhart said the market seemed to be underestimating the odds of a rate lift in June. Investors currently only assign a 12% chance of such a move, according to pricing in interest rate futures contracts. Lockhart said two rate hikes this year are certainly possible. Lockhart is not a voting member of the Fed's FOMC, but his view is seen as a bellwether for what the majority on the central bank is thinking. 

Australia
The Reserve Bank of Australia surprised economists by slashing interest rates to a new historic low in a bid to reignite inflationary pressures. The central bank cut the official cash rate by 25 basis points to 1.75%, after keeping rates on hold for a year. The decision came after the Australian Bureau of Statistics released quarterly CPI data, showing headline inflation plunged from 1.7% in the final quarter of 2015 to 1.3% last quarter. Worrisome though, was that all three gauges of underlying inflation came in below the RBA's 2-3% target range in the reported period, with two of the three core measures hitting their record low. RBA Governor Glenn Stevens also added that softening conditions in what was an overheated housing market allowed the central bank to cut without fear of fuelling unsustainable price growth.

ECB
ECB President Mario Draghi responded to critics from German Finance Minister Wolfgang Schauble that negative interest rates hurt savers and weighing on the banking sector. Draghi said that low interest rates are not harmless but they are only the symptom, not the cause of an underlying problem, adding that there was no alternative for now. 

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Mon, 09 May 2016 05:54:03 GMT

US labour market loses steam in April

The US labour market lost steam in April, as the world's biggest economy created the fewest number of jobs in seven months and Americans dropped out of the labour force, casting doubts on whether the Fed will hike interest rates before the end of the year.

Fri, 06 May 2016 07:46:24 GMT

RBA downgrades sharply its inflation forecast

The Reserve Bank of Australia revised sharply downwards its inflation forecasts after slashing interest rates just days earlier due to weak first-quarter inflation data.

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