In the US, prices for consumer goods and services were unchanged in December, as they were held in check by falling petrol costs. Consumer prices climbed 1.7 per cent over the whole of 2012. This is the third lowest rate in the past 10 years and down from a three per cent increase in 2011.
Low inflation gives the Fed leeway to stick to its strategy of trying to boost the economy through quantitative easing – a controversial programme of buying billions of dollars worth of government and mortgage-related bonds.
The Fed’s objective is to lower interest rates and thus encourage bank lending.
In the eurozone industrial production fell for the third consecutive month in November, against predictions of a 0.2 per cent rise.
Industrial production, that is, factory output, fell 0.3 per cent during the month from the previous month, continuing a fall that began last summer.
Two-thirds of the eurozone factory output is generated in Germany, France and Italy.
Industrial production for the month was also down almost four per cent on an annual basis. An encouraging sign, however, is that after two months of declines, output of machinery to produce other goods rose 0.7 per cent in November compared to October. This is an indicator of future business.
Finally, in the UK, as the economy struggles to recover from a double-dip recession, the December inflation rate held at the highest level since May.
This was due to increases in gas and electricity bills that helped keep consumer-price growth above the Bank of England’s two per cent target.
Data released by the Office for National Statistics shows that consumer prices increased by 2.7 per cent from a year earlier, the same as in November and October.
Stubborn inflation was probably a key argument against more quantitative easing to stimulate growth at the Bank of England’s monthly policy meeting last week.
This article was compiled by Bank of Valletta plc for general information purposes only.