We bring you our regular Monday recap of the most interesting economic events we noted in the past trading week.
The first half of the week was weaker on fundamentals. The second half was mainly marked by interest rates, which moved the market decisively. The Fed in particular had its attention.
On Wednesday (15.12.) came the long-awaited data on the interest rate announcement from the USA, where the Fed left interest rates unchanged. At the same time, the Fed pledged to use a range of tools to support the economy at this challenging time. It wants to support its objective of maximum employment and maintaining price stability. The job market is a slight disappointment. Powell (Fed Chairman) said at his conference that the Omicron option is a definite risk, but still the US economy sees rapid growth. The path of the economy will continue to depend on the course of the virus. Advances in vaccination are expected to boost economic activity and increase employment.
The Committee plans to maintain the rate range between 0-0.25 % until labour market conditions reach an appropriate level. Thus, the long-awaited US equity market crash did not take place and in our eyes the Fed just postponed solving its problems.
A day later, we watched the UK interest rate announcement, where the long-in-the-air rate hike finally came. The Bank of England's Monetary Policy Committee set monetary policy to meet the 2% inflation target. Since the November meeting, the Omicron variant of Covid is again playing a role, which appears to be much more portable and poses new risks based on current knowledge.
On the same day, we could also watch the announcement of interest rates in the euro area, where the European Central Bank left rates unchanged. In support of its symmetric 2% inflation target and in line with its monetary policy strategy, the Governing Council expects the ECB's key interest rates to remain at current or lower levels until inflation reaches 2 %.
What's in store for the current trading week?
This week we expect less volatility in the markets through the Christmas holidays. The only economic data worth noting will come from the UK (Retail Sales, GDP) and US GDP on Tuesday and Wednesday.
There comes that time when you need to put business aside for a while and enjoy the holidays with your family.