The Bulletin December 2017

The Fed raised interest rates by 25bps for a third time in 2017 at its final meeting of the year in December, and indicated that three further quarter point hikes are likely to be warranted in 2018. It revised up its forecast for GDP growth this year to 2.5%, largely on account of an assumed fiscal boost to the economy, and expects inflation to return to its 2% target by year-end. The ECB, meanwhile, left its policy stance unchanged at its December meeting. It has also revised up its 2018 growth forecast, to 2.3%, but expects inflation to slow this year and to remain below target thereafter, albeit picking up gradually. Hence it reiterated that an ‘ample’ degree of monetary stimulus is still required to return inflation sustainably to its target.

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The Bulletin December 2017