Weekly financial market overview 25.01.-31.01.
Main events of the previous week
At its first meeting in 2021, the US Federal Reserve kept its base interest rate at 0-0.25%. The regulator said in a statement that the Open Market Committee has decided to maintain its target range for the federal funds rate at 0-0.25% and expects it to be appropriate to maintain that target range until labor market conditions reach levels consistent with the committee's estimates of maximum employment and inflation is approaching 2%. In addition to keeping rates at current levels, the Fed plans to continue buying at least $80 billion in Treasury bonds and at least $40 billion in mortgage-backed securities monthly in the coming months until significant progress is made towards the maximum employment and price stability. The Fed stressed that the COVID-19 pandemic continues to put pressure on economic activity, employment and inflation and also poses significant risks to the economic outlook - both in the US and around the world. US Federal Reserve Chairman Jerome Powell said at a press conference following the first meeting this year that the US economy is far from fully recovering, and about 9 million people remain unemployed due to the pandemic. He also added that the economy is far from our employment and inflation targets and it will likely take time to make significant further progress. He explained that until these goals are achieved the US intends to pursue adaptive monetary policy. Powell reiterated that the outlook for the US economy remains "highly uncertain." He stressed that he does not expect inflation to rise much higher than the target level of 2%, but if it does the Fed "has the tools to address" the issue. The head of the Central Bank indicated that with a slight increase in this indicator, the authorities will not take any significant measures, but only monitor it.
In its January report, the International Monetary Fund (IMF) improved its forecast for global GDP growth this year by 0.3 percentage points from its October estimates. According to analysts of the fund, this year the growth rate of world GDP will be 5.5%, in the October forecast this figure was 5.2%. In 2022, the IMF expects 4.2% growth. Last year, according to the fund's analysts, the world economy contracted by 3.5%, while in the fall, experts expected that by the end of 2020, global GDP would fall by 4.4%. The report says the upward revision of the forecast for 2021 by 0.3 pp reflects additional support measures in several large economies and expectations of stronger economic activity later this year due to vaccinations. According to the forecasts of the fund experts, the volume of world trade will increase by 8.1% this year and by 6.3% in 2022. In most countries, fiscal deficits are also expected to decline, driven by higher government revenues and lower spending as economic activity recovers. At the same time, the document notes that, in general, the approval of the countries' regulators of vaccines against coronavirus "gives hope" to overcome the pandemic, however, new waves of the spread of infection and new variants of the virus raise concerns in terms of economic forecasts.
US. According to initial estimates, fourth-quarter GDP grew 4% year-on-year (compared to the third quarter of 2020), in line with analysts' expectations.
The number of initial jobless claims for the week was registered in the amount of 847 thousand, which is 67 thousand less than the week before and 53 thousand less than predicted by analysts.
The volume of orders for durable goods in December increased by 0.2% versus the previous month. The growth of the base indicator, which does not include civil aviation, was 0.5% over the same period.
In December, the level of personal income increased by 0.6% m/m, while the level of personal expenses in December decreased by 0.2% versus November.
Key events this week
- On Monday, the US, Eurozone and China will know the level of business activity in the industrial sector in January.
- On Tuesday, the size of the fall in GDP in the fourth quarter will become known in the Eurozone.
- On Wednesday, the Eurozone will report inflation numbers for January and the US will publish data on changes in oil reserves for the week.
- On Thursday, the US will know the number of initial jobless claims for the week.
- On Friday, the US will know the state of the labor market in January as well as the trade balance figures for December.
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