US President Donald Trump officially nominates Federal Reserve Board member Jerome Powell as future president of the central bank, Reuters reports. Although Janet Yellen will withdraw from office, Powell’s candidacy is almost certainly an indicator that the main features of her policy will not be changed and the course of the central bank will be preserved. Yellen became famous for her more protective monetary policy and played a major role in stabilizing the US economy in the years after the financial crisis.
The Federal Reserve left unchanged the U.S. base rate in the range of 1% - 1,25% at its last meeting, but hinted at an increase in December. Markets did not expect the Fed to make a change, but the stakes are already on raising interest rates at the next meeting. In the statement published on the institution’s website, it is written that the labor market in the United States continues to strengthen, and economic activity is growing at a steady pace despite the damage that the hurricanes of the economy have caused.
New jobs in the US in October amounted to 261 thousand, which is less than expected, but it is a sharp rebound after weak September. Initially, a decline in employment was recorded in September, but revisions in the current report show that there was an increase of 18 thousand positions at the time. Unemployment decreased from 4.2% to 4.1%, which is the lowest value since 2000.
Orders for factories in the United States increased by 1.4 percent in September (based on 1.2 percent in August) and the services sector last month reported the largest growth of 12 years. September factory orders are the fastest growth in four months. At the same time, a key category taking into account the investment plans of the business has grown to the greatest extent over a year.
Over the past week, data on labour productivity in the US in the third quarter increased at its fastest rate in three years, labour costs also increased. U.S. output outside the agricultural sector is increasing by an annual accumulation of 3% in the third quarter, the fastest growth rate since the same quarter of 2014, the Labour Ministry reported on Thursday. This surpasses the average economic estimate of 2.4% growth, as well as the increase of 1.5% in the second quarter.
The Republicans in the US House presented their tax reduction plan, which provides for a lower corporate tax rate, smaller taxes for most people and a reduction of the discount for homeowners.
New proposals will increase government debt by 1.5 trillion dollars in the next decade, the AP said. Middle income families will pay less thanks to doubling the standard discount and increasing child tax credits.
The Republicans propose to abandon the current seven-step income tax scale, instead of which a three-step - 12 percent, 25 percent and 35 per cent will be introduced, as well as an additional category for people with high income - 39.6 per cent. The corporate tax is expected to decrease from 35 to 20 percent. A rate of 12 percent is planned on the profits of foreign branches of US corporations in an attempt to prevent the transfer of US companies abroad. A return to the country will be given to profits accumulated outside of the country on a one-off payment at a lower rate.
Powell’s election as president of the Fed, expected tax reform, macro data from the United States, and good corporate reports apparently prepare the ground for a new year’s rally. Wall Street indexes ended the week with new highs.
The Bank of England raised the interest rate by 0.25 percentage points to 0,5%. The decision on the first increase in interest of July 2007 was expected by the markets. The central bank monetary policy committee supported the decision to raise interest by 7 to 2 votes. The decision comes at a time when inflation on the island reaches 3% and economic growth slows down. The British central bank may not be able to reduce interest rates if Britain’s exit from the European Union, known as Brexit, is worse than the central bankers now expect, Bank Governor Mark Carney said.
The events in Catalonia have an increasingly regional impact on capital markets. Investors do not calculate in their plans independence of the district. Unfortunately, the impact on the local economy has already been made, with more than 2,000 companies leaving the region.
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