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Earlier this week, the Central Bank of America (Fed) left the current monetary policy untouched. This decision came as no surprise because it was already known that short-term interest rates will remain close to zero until 2023. The Fed delivered on its earlier promise to provide more clarity on future monetary policy. For the first time, the central bank put a dot on the horizon regarding the duration of the buy-back programme: only when there is a substantial improvement in inflation and employment will the buy-back programme be adjusted. 

In the commentary on monetary policy, Fed Chairman Jerome Powell indicated that there was currently no need to make any adjustments. Sectors sensitive to interest rates such as the automotive and housing markets are performing well. Furthermore, the Fed can do little for sectors affected by the lockdown measures. It is up to the government to compensate SMEs and individuals for lost revenues.

As a result of the corona crisis, millions of Americans have called on the social safety net in recent months. Last week, 885 000 applications were made for unemployment benefits. 

The unexpected further increase in aid applications is the result of major reorganisations of companies affected by the new lockdown measures. There is increasing pressure on the Republicans to come to an agreement with the Democrats on an aid package. Rumours that the Senate is about to sign a USD 900 billion deal put all three Wall Street equity indices at their highest closing ever.

Bank of Japan

Not only the Fed, but also the Central Bank of Japan spoke out. The Bank of Japan (BoJ) kept monetary policy unchanged. However, it extended by six months the special support programme for companies affected by the pandemic. It is noteworthy that the most aggressive central bank in the world, the BoJ now owns half of Japan’s total public debt, is looking for new ways to achieve the 2% inflation target. The results of the study are expected to be published next March. 

German business confidence

The IFO index for the business environment in Germany increased slightly more than expected in December. The composite index for industry and trade rose from 90.7 in November to 92.1 in December. Economists had predicted a figure of 90.5 because the index had already fallen in the last two months. At that time, increasing coronary measures were a major cause. Germany is now in a new lockdown but, according to the IFO research institute, only a limited part of the economy is being hit hard. In general, the economy appears to be more resilient than expected. The mood in the industry, in particular, has improved considerably.


In order for investors to enjoy the holiday season peacefully, there is one more hurdle to overcome: reaching a Brexit deal before the end of the year. According to the negotiators, the British and the European Union continue to disagree on fisheries. Discussions continue today, but if the European Union does not make significant concessions, negotiations will break down, according to British Prime Minister Boris Johnson. However, the European Union will not allow itself to be pressured and has adopted the position “better no deal than a bad deal”.

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