Key highlights of the week ended September 11

Source: Dukascopy Bank SA
UK
The nine-member Monetary Policy Committee of the BoE voted 1-0-8 to keep its benchmark interest rate at a record-low 0.5%. The only member who voted for an immediate increase by 25 basis points was Ian McCafferty. September's MPC minutes continued to sound more dovish as downside risks to global economic activity and the inflation outlook have increased since the August Inflation Report. The BoE also stuck to its view that consumer prices will start to pick up around the turn of the year, though it noted that a drop in oil prices had increased uncertainty about the near-term outlook. Minutes also showed that there was considerable scepticism about how the strength of the Sterling would feed through to the UK inflation. However, the central bank retained its positive outlook on the UK economy's prospects, despite the concerns over China and the global economic growth.

Canada
The Bank of Canada kept its key interest rate on hold at 0.5% and said the nation's resource sector continues to adjust to lower prices for oil and other commodities. Policy makers maintained the benchmark rate on overnight loans unchanged after slashing it twice this year in January and July. While the central bank voiced concerns around China's growth prospects and noted the spill-over effects from lower oil prices on the rest of the economy, it underlined a recovery in Canada's exports coupled with unchanged inflation outlook. The BoC expects that economic growth will accelerate pace in the second half of the year, with the third quarter coming in around 1.5% and the final three months of the year advancing to 2.5%.

Japan
Japan's economy contracted at an annual 1.2% pace in the second quarter from the previous three-month period, while economists warned a slowdown in China and a turmoil in equity markets might undermined an expected recovery in the second half of the year. Yet, the world's third biggest economy shrank at a slower pace in the reported period than initially estimated as inventories were revised higher. Measured on a quarterly basis, the Japanese economy contracted 0.3%, compared with the initial estimate of a 0.4% slide and following the 1.0% expansion in the first quarter. Public inventories contributed 0.3 percentage points to the economic output instead of 0.1 percentage points thought earlier.

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