Key highlights of the week ended February 19

Note: This section contains information in English only.
Source: Dukascopy Bank SA
US
Policy makers of the FOMC saw growing uncertainty over the outlook for inflation and growth, according to minutes of the January meeting, when the key lending rate was kept unchanged. US rate setters left the target range for federal funds rate on hold at 0.25% to 0.5%, after lifting it from near-zero in December. Many analysts are predicting further increases this year. While most of policy makers stuck to the expectation of 2% inflation over the medium-term, a number of members "viewed the outlook for inflation as somewhat more uncertain or saw the risks as being to the downside". However, the available data were not sufficient to assess the balance of risks to the economic outlook. Given the elevated risks, both external and domestic, some members wanted to see an evidence of inflation moving back to the 2% target before they were willing to consider further rate increases.

UK
Britain's inflation climbed to the highest level in a year in January as an increase in alcohol and clothing prices pushed up the cost of living. The annual consumer price index rose to 0.3% in January, up from 0.2% in the prior month. Alcohol and tobacco were the main contributors to the increase as they jumped 1.3% compared with January 2015. The ONS reported that inflation also rose as fuel and food prices declined less than they did a year ago. Core inflation, which strips out volatile components such as energy and food, slowed to 1.2%. Inflation is predicted to edge up slowly this year, as the impact of global oil plunge drops out of the headline rate. However, the Bank of England expects the price growth to remain below its 2% target until 2018. The central bank predicts consumer prices to rise to 0.5% by the summer. 

Euro zone
The ECB President Mario Draghi said the central bank "is ready to do it part" in March if the financial market volatility or the pass-through effect of low oil prices reduces inflation expectations. Draghi also added that fiscal policies including public investment and lower taxation should put the Euro area's economy on a firmer ground. ECB President welcomed improvements in the banking sector, saying that Euro bloc's banks have significantly strengthened their capital positions. However, Draghi acknowledged that some parts of the banking sector still faced a number of challenges, including "uncertainty about litigation and restructuring costs in a number of banks working through a stock legacy assets. Last week saw renewed market volatility, particularly on Euro zone bank shares, which Draghi said was due to slowing growth in emerging markets and falling commodity prices, as well as anticipation that new financial regulations and lower interest rates would drag down bank profits. 

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