According to minutes of the December meeting of the Federal Open Market Committee published on Wednesday, Federal Reserve (Fed) policymakers had initial discussions on the appropriate conditions and timing for cutting the amount of bonds the central bank holds, with members saying that a reduction in the balance sheet will likely to start sometime after the central bank begins raising interest rates.
The minutes also showed that officials eyed a faster timetable for raising interest rates this year, possibly as early as March, amid greater discomfort with elevated inflation. While policymakers did not specify when the Fed will start reducing the nearly $8.3 trillion in Treasury bonds and mortgage-backed securities the Fed currently holds, statements from the meeting indicated that the process could begin in 2022, possibly in the next months.
Meanwhile, the final reading of the eurozone composite purchasing managers’ index, or PMI, fell to 53.3 during December, down from 55.4 in November, amid a resurgence in COVID-19 cases. While the final reading was below an earlier 53.4 ‘flash’ estimate, it did hold above the 50-mark separating growth from contraction.
“The accelerated expansion in output we saw in November unfortunately turned out to be brief. The spread of the Omicron variant had a particularly profound impact on the services sector, reflecting renewed hesitancy among customers,” said Joe Hayes, senior economist at IHS Markit.
Finally, in the UK, mortgage approvals fell in November as activity in the housing market eased following a rush last year, motivated by the tax holiday on stamp duty. Lenders approved 67,000 mortgages in November, a marginal drop on the 67,199 home loans sanctioned in October, according to a report by the Bank of England published on Tuesday.
The flat mortgage approval rate, which acts as an indicator of future house purchases, was the lowest since the middle of 2020 when the market was just emerging from the first COVID-19 lockdown.
This report was prepared by Bank of Valletta plc for general information purposes only.