Minutes of the Federal Reserve’s (Fed) July monetary policy meeting made public on Wednesday indicated that policymakers are on track to begin reversing their easy-money policies later this year, despite lingering differences over when exactly to pull back support for an economy growing faster than they envisaged earlier in the year.

The minutes revealed an emerging consensus among Fed members to begin scaling back the bank’s $120 billion in monthly purchases of Treasury and mortgage-backed securities at any of the committee’s three remaining policy meetings this year. With the Fed pledging to provide advance notice before making changes to its asset purchase programme, the statement following the next monetary policy meeting in September is likely to be closely watched.

Meanwhile, spending at US retailers fell sharply in July, as Americans bought fewer goods amid a rise in COVID-19 cases tied to the Delta variant. Retail sales – a measure of purchases at stores, restaurants and online – fell by 1.1 per cent last month compared with June, the Commerce Department reported on Tuesday. The closely watched core retail sales, which exclude automobiles, gasoline, building materials and food services, slumped by one per cent in July after surging by 1.4 per cent in June.  Tuesday’s report suggested Americans continued to shift their spending towards services in July. Sales dropped across several categories, primarily autos – which was down 3.9 per cent – but also clothing, sporting goods and furniture. The retail sales figures capture spending mostly on goods and don’t include services such as travel, entertainment and recreation.

Finally, the eurozone economy recovered from a technical recession in the second quarter with the reopening of member-country economies after the coronavirus lockdowns, an initial estimate from Eurostat showed on Tuesday. Gross domestic product (GDP) grew by two per cent sequentially, compared to a 0.3 per cent decline in the first quarter.

On a yearly basis, GDP rebounded by 13.6 per cent after contracting by 1.3 per cent in the first quarter. The strong growth in the eurozone GDP in the second quarter is likely to be repeated in the third quarter despite the spread of the Delta variant and should bring the economy back towards its pre-virus size in the coming months, Jessica Hinds, an economist at Capital Economics, said.

This article was prepared by Bank of Valletta plc for general information purposes only.