The European Central Bank (ECB) raised its key interest rate by 25 basis points to 1.25 per cent last Thursday, tightening monetary policy as expected by most market analysts, in order to curb increasing inflation pressures in the 17-country eurozone.

Eurozone inflation rose to 2.6 per cent last month, above the ECB’s medium-term target of just below 2.0 per cent, leading many analysts to speculate that Thursday’s rate rise will be the first in several such rises to occur throughout the year.

The Bank of England (BOE), meanwhile, held interest rates at a record-low 0.5 per cent last Thursday, opting to hold off on raising rates until signs of a further recovery in the UK economy became clearer.

Despite inflation being almost twice as high in the UK as that of the eurozone – it currently stands at 4.4 per cent – Britain’s recovery remained shaky when compared with others in the region, such as Germany and France.

UK Chancellor George Osbourne said that Britain faced a debt crisis like that of Greece, Ireland and Portugal if it failed to cut a record peacetime budget deficit.

The BOE’s rate decision come on the heels of an unexpected fall in British industrial production in February, which suffered its biggest drop in 18 months, due mainly to greater-than-usual disruption from oil-field maintenance, official data showed.

Production fell by 1.2 per cent over a revised 0.3 per cent gain in January while analysts were expecting 0.4 pre cent increase.

In the US, new orders received by factories dipped unexpectedly in February, breaking a three month streak of gains, hampered by a drop in transportation orders. The Commerce Department said new orders for manufactured goods fell 0.1 per cent to $446 billion, after an upwardly revised 3.3 per cent gain in January.

This article has been prepared by Bank of Valletta plc for your general information purposes only.