Eurostat revealed last week that the inflation rate during February across the eurozone was above the European Central Bank’s target for the first time in four years. Inflation was driven higher by rising energy prices. The inflation rate increased from 1.8 per cent in January to 2.0 per cent in February. Eurostat said the last time the inflation rate was at two per cent was in January 2013.

The ECB is unlikely to ease its monetary policy position notwithstanding the continuous rise in eurozone inflation and recent positive eurozone economic news. Although the headline inflation rate has reached the ECB’s target, core inflation remained subdued, as the underlying prices (that is, excluding food and energy) are still restrained.

In the meantime, UK consumer confidence fell in February as both Brexit and a rise in interest rates are both becoming more likely. Market research firm GfK showed that consumer confidence fell in February to its lowest level since December 2014. Consumer confidence fell by one point from January to -6 in February, and down by six points year-on-year.

Joe Staton, head of Market Dynamics at GfK said: “Against a backdrop of rising food and fuel prices, sterling depreciation, nominal earnings growth and a burgeoning fear of rapid inflation, concern about our personal financial situation for 2017 has contributed to a drop in UK consumer confidence this month.”

Finally in US, the Federal Reserve is setting the stage for an interest rate rise as the economy may be strong enough to bear an interest rate hike “soon”. In a speech at Harvard University, Fed governor Lael Brainard said “assuming continued progress, it will likely be appropriate soon to remove additional accommodation, continuing on a gradual path”.

The statement marks a move from the cautious attitude that Brainard has used in her recent speeches arguing for rates to be kept low, but her latest comments could suggest that the Fed will raise interest rates this month.

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

Sign up to our free newsletters

Get the best updates straight to your inbox:
Please select at least one mailing list.

You can unsubscribe at any time by clicking the link in the footer of our emails. We use Mailchimp as our marketing platform. By subscribing, you acknowledge that your information will be transferred to Mailchimp for processing.