Inflation in US and UK reaches multi-year highs
ECB rate rise in July likely
In the US, inflation in May rose to its highest level in nearly three years. The core consumer price index (which excludes food and energy costs) surged 0.3%, representing the largest gain since July 2008.
Wednesday’s figure came in higher than the 0.2% analysts were expecting and equates to a yearly inflation reading of 1.5% for the month. Some market analysts believe some of the spike could be related to supply disruptions in the auto industry following the Japanese earthquake.
Inflation in the UK held at a two-and-a-half-year high in May, as higher food prices placed pressure on the finances of Britons and left the Bank of England in a quandary on where to set interest rates.
The consumer price index in England rose 0.2% last month, keeping the annual inflation rate at 4.5%, as expected by most economists.
Rising food prices more than offset a drop in travel costs as airfares dropped after the Easter holiday.
Meanwhile, higher energy prices kept inflation levels in the eurozone in May well above the European Central Bank’s target of two per cent, data released last Thursday showed, strengthening the case for the ECB to raise its interest rate in July.
Prices in the 17-nation region were flat month-on-month, at a yearly rate of 2.7%, just slightly down from April’s 2.8%.
Prices of transport fuel, heating oil and food were largely responsible for the persistent upward pressure on overall prices while prices for packaged holidays fell.
This article was compiled by Bank of Valletta plc for general information purposes only.