‘Most’ Federal Reserve officials are open to a December interest rate hike, the minutes of the US central bank’s October meeting revealed. Participants saw the downside risks arising from economic and financial developments abroad as having diminished, noting favourable economic indicators in China. They also judged the risks to the outlook for domestic economic activity and the labour market to be nearly balanced.

Policymakers shrugged off a disappointing September retail sales report, as gains in employment and income, low fuel prices and high consumer confidence were viewed supporting consumer spending. Some wanted to raise rates at the meeting, while most participants anticipated that these conditions for tightening could well be met by the December 15-16 meeting.

Eurozone inflation turned positive in October due to a slower pace of decline in energy prices. Consumer prices edged up 0.1 per cent from a year ago, reversing a 0.1 per cent fall in September. Headline inflation remains well below the European Central Bank’s target of ‘below, but close to two per cent’. ECB president Mario Draghi last week said the return of inflation is likely to take more time than expected earlier.

The central bank may well see the downside risks to eurozone growth and inflation being magnified by the recent terrorist attacks in France that could have some negative near-term impact on economic activity. ECB vice president Vitor Constancio said on Monday that the terrorist attacks in Paris late last week complicates the problems faced by the euro area and subsequent events will determine how the event affects the 19-nation economy.

The UK consumer price index remained negative for the second straight month in October largely due to lower food and energy prices. Consumer prices fell 0.1 per cent from a year ago, the same rate of decline as in September. Meanwhile, core inflation excluding food and energy rose 1.1 per cent in October from one per cent in September.

The Bank of England projected CPI inflation to rise to 0.4 per cent in December, and to 0.7 per cent in March 2016. The bank expects inflation to remain below one per cent until the second half of next year, reflecting the continuing drag from commodity and other cheaper import prices. The BOE is more likely than not to edge interest rates up from 0.50 per cent to 0.75 per cent sometime in the first half of 2016.

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