The US Federal Reserve (Fed) left interest rates unchanged in its last meeting before the 2020 presidential election in November. After ending its two-day policy meeting last Wednesday, the rate-setting Federal Open Market Committee (FOMC) indicated that interest rates would continue at their current level of close to zero until inflation rises above two per cent for “some time” so that it averages around two per cent over time.

A majority of FOMC members projected that interest rates would stay near zero through 2023. Beefing up the description of its future policy, the Fed “expects to maintain an accommodative stance” until the goals of maximum employment and two per cent inflation are achieved, it said in a statement following the meeting.

Meanwhile, the Organisation for Economic Cooperation and Development (OECD) upgraded its outlook for the world economy while warning policymakers not to tighten policy too quickly. The OECD said that global gross domestic product will shrink by 4.5 per cent this year and rise by five per cent in 2021. That is a big improvement from the OECD’s June projections, which was for a six per cent contraction this year, followed by 5.2 per cent growth in 2021. The OECD attributed the improvement to better-than-expected outcomes for China and the US in the first half of this year, and the massive government stimulus across the globe. But the Paris-based organisation said that output in many countries at the end of 2021 will still be below the levels at the end of 2019 and well below what was forecast before the pandemic.

Finally, in German, investor sentiment rose unexpectedly in September, the ZEW economic research institute said on Tuesday. That supports the view that confidence is recovering from the crisis brought about by the coronavirus pandemic, despite headwinds from stalled Brexit talks and rising new infection rates. The survey shows that investors’ economic sentiment rose to 77.4 this month from 71.5 points in August, confounding economists’ expectations of a fall to 69.8.

“The ZEW indicator has increased again, signalling that the experts continue to expect a noticeable recovery of the German economy,” said ZEW president Achim Wambach.

Europe’s largest economy has been recovering since May when lockdowns were lifted. However, activity remains below pre-crisis levels and economists expect a slow recovery.

This report was compiled by Bank of Valletta for general information purposes only.