The minutes of the latest Federal Reserve (Fed) meeting highlighted concern over the state of the global economy, driving investors to question the likelihood that the Fed will raise rates next month.

The minutes showed committee members continued to express concerns about the tame inflation scenario and the weak world economy, even as the US job market improved. On inflation, members think this will remain subdued as energy prices have slipped to multi-year lows. Market expectations for a Fed hike in September fell from one in two to one in three after publication of the minutes.

Rating agency Moody’s said last week that global economic growth is set to remain muted over the next two years and the outlook is subject to further risk from the Chinese asset price deflation, a likely US interest rate hike and a possible exit of Greece from the eurozone.

In its quarterly report, Moody’s retained its baseline forecast for G20 GDP growth at 2.7 per cent this year after a 2.9 per cent expansion last year. The growth rate is seen to climb to nearly three per cent next year. These growth forecasts were still below the G20’s average growth rate before the financial crisis, Moody’s said. The agency does not expect growth in the G20 to return to those pre-crisis averages in the next five years.

Finally, in the UK, the inflation rate unexpectedly rose in July as the headline reading of inflation rose to 0.1 per cent from zero. Clothing prices and smaller discounts in the summer sales this year compared with a year earlier were largely responsible for prices notching up. Economists had forecast the rate would stay at zero.

The core measure of inflation rose to 1.2 per cent from 0.8 per cent, the highest in five months and higher than the 0.9 per cent reading predicted by economists. While these figures were stronger than expected, inflation is still well below the Bank of England’s two per cent target. Policymakers have said it will remain low in the short term because of the strength of the pound and the continuing decline in prices of crude oil.

This report was compiled by Bank of Valletta plc for general information purposes only.