Weekly Fundamental Bulletin: Fed Likely To Maintain Status Quo

Last week’s highlights

Australia retail sales drop 4.2% in December

The latest retail sales report from Australia saw some bad news as the total value of retail sales fell 4.2% in December.

The data released by the Australian Bureau of Statistics missed the broader expectation of a 2.5% decline. This comes after retail sales rose by 7.1% in November.

Interestingly, retail sales from cafes, restaurants and food services rose, almost all of the rest of the categories fell during the period.

The biggest decline came from a 9% drop in household goods retailing. Food retailing fell by 2%, with the biggest declines from places like Victoria and New South Wales which saw stricter restrictions during the period.

New Zealand inflation rises 1.4% on the year

Consumer prices in New Zealand rose by 1.4% on the year during the fourth quarter of 2020.

The official data released last week saw an unchanged print compared to the previous period. The data also beat expectations of a 1% increase during the three months ending December 2020.

Housing and household utilities rose by 2.6% on the year with rentals rising 2.9%.

Food prices rose 2.5% while transport prices fell by 3.7% during the period. On a quarterly basis, New Zealand’s inflation rose by 0.6% beating expectations of no change.

However, the increase was at a slightly slower pace compared to a 0.7% increase in the third quarter of 2020.

ECB keeps monetary policy tools unchanged

The European Central Bank held its monetary policy meeting last week and left the key rates and its QE purchases unchanged. This was broadly in line with the market expectations.

The central bank also retained its forward guidance noting that it expects to see the interest rates staying low until inflation rises to 2%.

The January central bank meeting comes after the ECB extended its pandemic purchase program by 500 billion euros in December.

It also extended this scheme until March 2022. The central bank, in its statement, said that it remains committed to inflation and vowed that it would be ready to act.

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