With the Federal Reserve raising interest rates for the first time in a year and talking of three more increases to come next year, the dollar has strengthened and helped push banking shares higher, supporting European markets in general. Simon Gergel, chief investment officer of UK equities at Allianz told Reuters:

Rising interest rates are generally quite good for banks, depending on their specific situation, but in general they are sitting on large deposit bases and they can make a bigger spread as interest rates go up.

The market gains came despite a fall in commodity stocks after the greenback moved higher. The final scores in Europe showed:

• The FTSE 100 finished 49.82 points or 0.72% higher at 6999.01, tantalising close to the 7000 level
• Germany’s Dax rose 1.08% to 11,366.40
• France’s Cac closed up 1.05% at 4819.23
• Italy’s FTSE MIB jumped 2.09% to 18,994.79
• Spain’s Ibex ended up 1.33% at 9340.8
• But in Greece, the Athens market dipped 0.88% to 613.76

On Wall Street the Dow Jones Industrial Average is currently

Earlier there were some new US economic figures, all fairly positive in the wake of the Fed’s interest rate rise and plans for another three increases next year.

The consumer price index rose 0.2%, in line with expectations, while the New York Federal Reserve’s Empire manufacturing index came in at 9 in December, well above the consensus of 4 and the November figure of 1.5.

Jobless claims fell for the second week in a row, down 4,000 to a seasonally adjusted 254,000. This is the 93rd straight week that claims have been below 300,000, which is a level associated with a healthy jobs market.

Meanwhile the US current account deficit fell from $118.3bn in the second quarter to $113bn in the latest three months. A jump in soybean shipments boosted exports, according to the commerce department.

On Wall Street, the Dow Jones Industrial Average is now up around 120 points or 0.6%.

Greek bond yields are surging, with ten-year yields hitting a one-month high of 7.61%, up 25 basis points. Short-dated yields spiked to a four-month high ahead of a parliamentary vote on a bonus to poor pensioners that threatens to derail the country’s debt relief plans.

Two-year bond yields soared more than 150bps to 8.65%, the highest since August, and five-year yields jumped 16 bps to 8.34%.

The Greek finance minister, Euclid Tsakalotos, said the Greek government must be credible with its creditors, but also with the people of Greece. He insisted that the euro group had not taken any decision on debt relief for Greece yet, according to Reuters.

City experts have rapidly digested today’s news from the Bank of England, so here’s the best early reaction:

Ian Kernohan, economist at Royal London Asset Management, predicts that the Bank of England will leaves rates unchanged for some time:

“The Bank of England was not expected to change policy at this meeting, and their statement suggests that the balance of arguments favours keeping policy unchanged for the foreseeable future. They note that the forward-looking components of business surveys are weaker than those for current output levels, suggesting a slowdown in 2017. Also, with trade weighted sterling moving higher since their last meeting, this would result in a slightly lower path for inflation than they had envisaged.

“The MPC will remain sensitive to any slowdown in economic activity next year, with real income growth squeezed by rising inflation and Brexit uncertainty impacting corporate investment plans. In my view, the balance of probability still favours another small rate reduction next year, and with the Fed hiking rates, this will continue to put downward pressure on sterling against the dollar.”

But Nick Dixon, Investment Director at investment group Aegon, believes inflationary pressure will force interest rates up next year:

“With inflation moving towards the Bank’s 2% target quicker than expected, the only way is up for interest rates in 2017. Base rate hikes will be the tool of choice for the monetary policy committee to keep prices in check. Mortgage holders should consult their advisers now about fixing their rates before they rise”

Kallum Pickering of German bank Berenberg says the Bank is keeping a close eye on inflation and wage growth:

In August, by cutting the bank rate and expanding its asset purchases the BoE helped avoid a crisis immediately after the Brexit vote. The good news is that the work is over for now. The UK economy requires no further support from monetary policy. The economy has outperformed expectations since the referendum. And while growth is set to slow next year the risk of recession looks low.

The BoE’s GDP growth outlook of 1.4% in 2017 and 1.5% in 2018 is broadly in line with our own call of 1.5% growth in each year. The final minutes of the year indicate that the MPC is in a neutral gear for now.

The committee continues to pay close attention to the Brexit-related downside risks to growth, especially the squeeze on real incomes coming from the anticipated rise in inflation from the sharp sterling depreciation.

The pound has fallen sharply against the US dollar, as investors digest today’s Bank of England decision.

Today’s minutes show that the Bank has revised its inflation forecasts down a little, due to the recent recovery in sterling. So that means there’s less chance that interest rates might be hiked.

The MPC says:

“Since the Committee’s previous meeting, sterling’s trade-weighted exchange rate has appreciated by over 6%, while dollar oil prices have risen by 14%.

All else equal, this would result in a slightly lower path for inflation than envisaged in the November inflation report, though it is still likely to overshoot the target later in 2017 and through 2018.”

And that’s enough to knock almost one cent off the pound today, to $1.2478.

The minutes of this month’s Bank of England meeting show that the central bank sees no need to change monetary policy, as little has changed since November’s inflation report.

The monetary policy committee says:

“A slowdown in growth remained likely, but there had been little news since the time of the November inflation report about domestic activity and, although the near-term global outlook had improved, this was counterbalanced by more elevated risks.”

The minutes also highlighted a “notable decline in consumer confidence”, repeated a forecast for unemployment to rise next year and for inflation to overtake pay growth “marginally” in 2017.

The Bank reiterates its previous stance that is was ready to make monetary policy tighter or looser depending on how the economy evolves as the Brexit process gets underway.

“Monetary policy could respond, in either direction, to changes to the economic outlook as they unfolded to ensure a sustainable return of inflation to the 2% target.”

Breaking: The Bank of England has voted to leave UK interest rates unchanged at their current record low of 0.25%.

More to follow

Just 25 minutes to go until the Bank of England announces its interest rate decision.

With everyone expecting No Change, the real news will probably be in the minutes of this month’s meeting.

Kathleen Brooks of City Index says there are three things to watch out for:

• Inflation: price pressure is building, could the larger than forecast increase in prices in November worry the Bank, especially if this pace of increase continues?
  
• Any clarification on just how tolerant the Bank will be of an inflation over-shoot.
  
• Could the Bank balance any hawkish concern about inflation, with concern about the impact of Brexit and the triggering of Article 50.
  

Over in Greece, prime minister Alexis Tsipras seems to have found support from the majority of political parties who will be backing his drive to hand out pre-Christmas fiscal gifts in a roll-call vote later today.

MPs are being urged to back Tsipras, even though the giveaways have alarmed Greece’s creditors - prompting them to freeze short-term debt relief plans yesterday.

Our correspondent Helena Smith reports.

Passions are flaring ahead of today’s vote with senior cadres in the Syriza party calling it one of the most crucial ballots since the leftists assumed power. Addressing the 300-member House this morning, the Interior Minister Panos Skourletis emphasised the significance of the moment.

“This is not a chance moment but a moment where parliament should affirm the right of the government of the country to do the self-evident. The agreement [with lenders] foresees it and the numbers prove it. I don’t understand why we should wait. Citizens’ needs, pensioners’ needs have a priority over the needs of Brussels.”

Ahead of the ballot political parties, including the far right Golden Dawn, are signalling they will endorse the embattled prime minister’s spending spree. The KKE communist party and social democrat Pasok party also said they would support Alexis Tsipras’ decision to, in effect, grant retirees a 13th pension in the form of a pre-Christmas bonus.

The main opposition centre right New Democracy party said it would not support the legislation and instead vote “present.”

Speaking in Brussels, its leader Kyriakos Mitsotakis declared that the leftist-led administration was “gambling” with the debt-stricken country’s future. Tsipras, he said, “has once more proved himself to be immoral and dangerous.”

Greek journalist Eleni Varvitsiotis has heard that creditors are about to go public with their concerns:

JD Sports has become the latest retailer to face serious criticism over working practices, a year after its rival Sports Direct found itself in very hot water for paying staff less than the legal minimum.

An investigation by Channel 4 found evidence of staff at its Rochdale warehouse being badly treated, including a “3 strikes and you’re sacked“ policy, staff being threatened with dismissal for sitting down, and airport-style security checks and random searches.

Shares in JD Sports fell 7% yesterday as the news broke. And today, the company told the City it was opening an investigation.

TUC General Secretary Frances O’Grady says politicians need to do more to protect workers:

“These are degrading conditions to work in. The practices exposed at JD Sports show just how little value some companies attach to their staff.

“JD Sports’ initial response – denying the problems – doesn’t instil confidence.

“It’s increasingly clear that Sports Direct wasn’t just one bad apple, and that terrible working practices are taking place across the UK.

“The government needs to look seriously at how this sort of behaviour continues to take place in today’s Britain.

“Unions in workplaces can stamp out this sort of abuse. I would encourage anyone working in a warehouse like this to join a union and ensure that management cannot ignore their voice.”

Newsflash from a chilly Bern: The Swiss central bank has left interest rates unchanged at their current record low of minus 0.75%.

The SNB says the global economy has continued to recover, but threats remain -- including Britain’s exit from the EU.

Here’s a flavour:

In the UK, the economic impact of the Brexit decision has so far proved less pronounced than originally feared.

The SNB expects the moderate pace of global growth to continue in 2017. The baseline scenario for the world economy is still subject to considerable risks, however. Structural problems in a number of advanced economies could negatively affect the outlook. Added to this are a multitude of political uncertainties which are particularly associated with the future course of economic policy in the US, upcoming elections in several countries in the euro area as well as the complex and arduous exit negotiations between the UK and the EU.

Government bonds are being pummelled in early trading - as they suffer from the Federal Reserve’s decisions.

With prices sliding, the interest rate on UK 10-year gilts has jumped to 1.52%, up from 1.38% yesterday. That’s the highest yield since May, before the Brexit vote.

Other government bonds are also being hit - the yield on 10-year US Treasuries (America’s debt) has jumped to 2.61%, from 2.51%.

French, Italian and Spanish bonds are also weakening in value (prices fall when yields rise), as traders pull money out of bonds.

With the Fed predicting faster rate hikes next year, investors are demanding a higher rate of return for holding government bonds.

Marc Ostwald of ADM Investor Services says:

As was perhaps to be expected, markets took some umbrage at the dot plot’s implication of one additional rate hike in 2017.

The US dollar has surged to a 14-year high against other currencies this morning, after the Federal Reserve raised American interest rates last night.

In volatile trading, the dollar index (the broad measure of the currency’s strength) hit its highest level since 2003.

It hit a record high against the Turkish lira, an eight year high against the Chinese yuan, and a 20-month high against the euro (which has slid back to $1.0478).

The surge came after the Fed predicted it would raise interest rates three times in 2017, up from the two hikes predicted in September.

And with Donald Trump promising huge spending on infrastructure once he becomes president, investors are concluding that the Fed may have to tighten monetary policy faster than expected to rein in inflation.

Stephen Innes, senior trader at Oanda in Singapore, said in a note that Fed chair Yellen has surprised the markets by not talking a softer tone.

“This is flat out hawkish, and the US dollar is reacting accordingly,”

“I thought we would be calling the Yellen bluff this morning, as the market had expected at most a subtle shift in Fed language.

“However, the Fed’s forward guidance is in reaction to Trumpflation as Dr Yellen did little to quell the markets’ pent up the view that both growth and inflation will accelerate in 2017.”

More here:

However..... there are reasons to be cautious. The Fed may be expecting three rate hikes in 2017, but that certainly doesn’t mean it will definitely happen.

Philip Shaw of Investec points out that policymakers had expected four rate hikes this year - and only delivered one, last night.

(each dot shows where one Fed policymaker expects US interest rates to be)

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

Get out the tinsel and put on the party hats, because Britain’s final central bank meeting of the year is upon us.

At noon UK time, the Bank of England will announce its decision on monetary policy, as it continues its balancing act since the Brexit vote.

The City expect the BoE to leave interest rates on hold today, at their current record low of 0.25%. But will it maintain its ‘neutral bias’ - meaning the next move in rates could be up or down? And will any policymakers split from the pack, or will it be a 9-nil vote?

The Bank has a lot to think about right now, with inflation jumping to 1.2% in November as the weak pound drives import prices up.

Yesterday’s labour force data is also a concern, with employment falling for the first time since the EU referendum.

So governor Mark Carney and colleagues need to tread cautiously, especially with Britain facing a ‘lost decade’:

Also coming up today....

The Swiss and Norwegian central banks are also announcing their decisions on monetary policy this morning.

On the economic front, we get new ‘flash’ estimates of the eurozone manufacturing and service sectors from Markit at 9am, plus US inflation and manufacturing reports this afternoon.

We’ll also keep tracking Greece, where relations between Athens, European officials and the International Monetary Fund are becoming more strained by the day.

As we covered yesterday, Europe’s bailout fund froze plans for Greek debt relief after prime minister Alexis Tsipras announced new help for poorer pensioners.

Tsipras won’t be cowed, though. He’s asking parliament to vote on giving 1.6 million pensioners a Christmas bonus of between €300 and €800, and whether to suspend a planned increase in sales tax for Aegean islands which have been hit by the migrant crisis.

We’ll be tracking all the main events through the day.....