The European Central Bank (ECB) kept its bond buying programme and interest rates unchanged and maintained its cautious approach, even though inflation and growth have increased at a faster pace than expected.

The ECB said the main refinancing rate will remain at zero per cent, while the deposit facility rate will be kept at -0.4 per cent. The rate on the bank’s marginal lending facility was left unchanged at 0.25 per cent.

Furthermore, the ECB reaffirmed it will maintain its asset purchase programme, known as quantitative easing (QE), but this will be reduced to €60 billion per month from April from the current €80bn per month.

In the meantime, German industrial output increased sharply in January from December, exceeding economists’ expectations. This rise was led by strong demand for machinery, cars and other capital goods, though energy and construction pulled down the overall growth.

According to figures published by the German statistics agency Destatis, industrial output grew by 2.8 per cent in January from a month earlier, when production fell by a revised 2.4 per cent.

This output growth was the highest rate in five months. Analysts had estimated that production would rise by 2.6 per cent following a decline, initially projected at three per cent, in December.

These figures gave some reassurance that the expansion in the German economy is likely to continue, after data released last week showed that factory orders indicate the biggest slump in demand in eight years in January.

Finally, in the US the services sector expanded in February at the fastest pace since October 2015.

The Institute for Supply Management (ISM), a trade group for purchasing managers, said that its non-manufacturing index rose from 56.5 in January to 57.6 last month. Any reading above 50 indicates that more businesses are expanding instead of contracting.

ISM surveyed 18 service sectors in February, out of which 16 reported growth, with only real estate and information industries reported contraction. ISM also reported that US factories expanded in February at the highest rate in more than two years. Production, new orders and hiring all indicated growth.

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