Key highlights of the week ended December 19

Note: This section contains information in English only.
Source: Dukascopy Bank SA
US
After seven years of maintaining the federal funds rate near zero, the Fed announced its first rate hike in almost a decade, signalling its growing confidence in the world's number one economy. The Fed raised its target for the federal funds rate, the rate at which banks lend money to one another, from 0% to 0.25%. The modest increase is unlikely to have a significant impact on the American economy. Yet, the move is extremely important, as it is widely seen as the first step in a longer sequence of rate hikes over the next couple of years. By the end of next year, the US central bank expects the benchmark interest rate to climb to a median 1.375%, which implies four more 25 basis points increases over the coming 12 months. In 2017, officials are aiming to bring the policy rate up to 2.375%, which will take another four hikes. 

UK

British inflation rebounded slightly in November after being in negative territory for two months in a row. Nevertheless, growth in consumer prices remained near zero for 10 consecutive months, giving the Bank of England ample scope to decide when to hike interest rates even if the Fed takes action this week. Annual consumer price inflation climbed 0.1% last month from October's reading of –0.1%, aided by smaller-than-expected falls in the prices of alcoholic drinks, tobacco and transport. The UK inflation has stuck in a narrow range between –0.1% and +0.1% since February, mainly due to a decline in oil prices. However, robust growth in Britain's economy means the central bank have been less concerned about persistent deflation than their European colleagues. Core inflation, which strips out volatile components such as energy, food, alcohol and tobacco, climbed 1.2% from 1.1% in October. Last month the BoE predicted inflation to stay below 1% for the first half of next year.

New Zealand
  
New Zealand's economy expanded more than economists had predicted in the third quarter, driven by manufacturing and retail spending, which compensated for a decline in milk powder production. The nation's gross domestic product grew 0.9% from the June quarter, when it climbed a revised 0.3%, Statistics New Zealand reported. In annual terms, New Zealand's economic output increased 2.3% from a year earlier, compared with the 2.4% surge in the preceding three-month period. The economic revival has also been supported by a surge in spending by tourists amid a 12% decline in the New Zealand Dollar in the past year. The retail trade and accommodation industry soared 6% from a year ago, the quickest of 16 industries. The pickup in economic growth came after a weak middle of the year, when production stalled, due to sinking global dairy prices. That forced the central bank to launch an easing cycle in June, slashing the official cash rate four times to 2.5%. 

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