Key highlights of the week ended December 4

Source: Dukascopy Bank SA
Euro zone
The ECB decided to embark on more stimulus measures to fight stubbornly low inflation. The central bank lowered the interest rate of the deposit facility by 10 basis points to –0.30%. In addition to that, the ECB extended its asset-purchase programme until the end of March 2017, or beyond, if necessity arises. However, the bank did not decide to boost the monthly purchases, disappointing markets who had anticipated for at least a 15 billion euros a month boost to 75 billion euros in assets a month. The central bank hopes that additional measures would reinforce momentum of the Euro zone's economic recovery and strengthen its resilience against global economic headwinds. 

The ECB revised its growth outlook upwards, predicting the currency bloc's economy would expand at a 1.5% rate in 2015, compared with the 1.4% projection in September, while the central bank kept the 2017 growth forecast intact. With regards to consumer prices, the ECB continued to expect inflation to remain at 0.1% this year. In 2016, however, the ECB lowered its inflation predictions from 1.1% to 1.0%.

US
Fed Chairwoman Janet Yellen reiterated that interest-rate hikes will be slow and gradual in the months ahead due to sluggish growth overseas as well as divergent monetary policies between the US and other nations. In her testimony for Congress' Joint Economic Committee, Yellen said that the Fed is ready to lift rates at the central bank's policy meeting this month as the domestic economy continues to strengthen. However, global setting is giving the Fed pause about acting aggressively beyond that. Yellen also added that the market is close to the Fed's goal of full employment and that drags on inflation will fade next year. Her comments came less than two weeks before the FOMC meets to decide on whether to raise interest rates for the first time in almost a decade. Fed officials hold their next policy meeting December 15-16. They are widely expected to raise short-term interest rates by a quarter-percentage point, from near zero, where they've been since December 2008. 

Canada
The Bank of Canada maintained its key overnight lending rate at 0.5%, highlighting that the domestic economy was adjusting largely as expected to the effects of low prices and other headwinds. The central bank stressed that the nation's economy benefitted from the US economic recovery, weaker Canadian Dollar and the bank's easing policy. Yet, the resource sector remains a problem for Canada's economy, as lower oil prices undermines the economy and business investments are facing major spending cuts in the energy related field. The latest GDP data showed the Canadian economy recovered in the third quarter, growing 2.3% annualized, close to the BoC's expectations of a 2.5% expansion rate. Nevertheless, the turnaround may be short-lived, as the quarter ended with a 0.5% contraction in September, suggesting a weak start to the final quarter of the year. According to the central bank's estimates, the nation's economy is likely to grow 1.5%.

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