According to European Central Bank (ECB) president Mario Draghi, the central bank’s massive asset purchase programme is proceeding smoothly and is having a notable impact on economic activity, which is expected to gradually strengthen in the months ahead.
“The implementation of our asset purchase programmes is proceeding smoothly, with volumes in line with the announced figure of €60 billion of securities per month,” Draghi said. He reiterated that asset purchases are intended to run until the end of September 2016. Speculation about a tapering of the monetary stimulus before that date were rejected as being premature.
In the US, following last week’s Federal Reserve Open Market Committee (FOMC) meeting, Fed officials offered contrasting views on the timing to raise interest rate.
Richmond Fed president Lacker commented that “the case for raising US interest rates will remain strong at the June meeting”, while Minneapolis Fed president Kocherlakota argued that it would be a “mistake” by the Fed to raise interest rates in 2015 and it should defer the first rate hike until the first half of 2016.
Most analysts expect the first interest rates hikes in 2015 as the economy improves, though the precise timing of the first increase remains uncertain.
Lastly, consumer price inflation (CPI) in Britain held steady at a record-low of zero per cent in March, according to figures released last week by the Office for National Statistics (ONS). Consumer prices were unchanged in March compared with a year earlier, in line with economists’ forecasts.
The ONS added that if the price change was calculated to two decimal places however, prices were 0.01 per cent lower than a year before, which would be the first fall on record in consumer price inflation on that measure.
British inflation has not been so weak since this data series began in 1989. This leaves inflation well below the Bank of England’s two per cent target. But for now, few economists think Britain is at risk of a Japanese-style deflation that has threatened the eurozone.
This report was compiled by Bank of Valletta plc for general information purposes only.