The Bank of England has decided to keep interest rates at a record low of 0.25 per cent but warned that it might need to start raising rates earlier than markets expect to keep inflation from rising. The bank’s Monetary Policy Committee (MPC) also voted unanimously to maintain the asset purchase programme unchang­ed at £435 billion.

Growth estimates by the bank were slightly lowered, falling to 1.9 per cent in May from two per cent in the previous estimate, while raising its forecast for economic output for next year and for 2019. In a statement, the bank said “the MPC expects inflation to rise further above the target in the coming months, peaking a little below three per cent in the fourth quarter”. The latest forecast puts inflation at a peak of 2.7 per cent at the end of the second quarter of 2017.

Meanwhile, Germany’s factory orders grew for the second straight month in March after a sharp decline of 6.7 per cent in January. Total orders rose by 1.0 per cent month-on-month in March, in line with expectations, but lower than the revised increase in February. The Federal Statistical Office reported that the rise was attributed to foreign demand, which grew by 4.8 per cent, offsetting a 3.8 per cent decline in domestic orders.

New orders from the eurozone grew by 6.8 per cent on the prior month, and that from countries outside the eurozone gained 3.5 per cent.

Finally in the US, a report released by the Labour department showed that import prices in the US rose by more than anticipated in April. Import prices rose by 0.5 per cent in April after a revised 0.1 per cent increase in March. Analysts had anticipated import prices to rise by 0.2 per cent.

The Labour Department said higher prices for non-fuel industrial supplies and materials, foods, feeds and beverages, and each of the major finished goods categories all contributed to the increase.

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

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