In a much-anticipated speech last week, Federal Reserve chairperson Janet Yellen said the Fed anticipates that only gradual increases in the Fed funds rate are likely to be warranted in the coming years.
Ms Yellen acknowledged that it is “too early” to say if the recent pickup in core inflation will prove durable. Given the current low oil prices, she continues to expect overall inflation for 2016 to remain “well below” the Fed’s two per cent objective. Ms Yellen emphasised the global dangers to growth and inflation and thus the need to proceed “cautiously” on interest rate tightening.
In the meantime, inflation in Germany inched higher in March, as rising prices for food, services and rents offset falling energy prices, a preliminary estimate showed. Germany’s national inflation gauge, as measured by the consumer price index, rose by 0.3 per cent in March after zero per cent in February, the federal statistics office Destatis said.
On the other hand, the Harmonised Index of Consumer Prices – the measure preferred by the European Central Bank – the inflation rate in Europe’s largest economy, stood at plus 0.1 per cent in March, compared with -0.2 per cent in February.
Finally, in the UK, the financial policy committee (FPC) of the Bank of England said that the referendum on the UK’s membership in the EU is the most significant near-term domestic risks to financial stability. The FPC judged that the outlook for financial stability had deteriorated since it last met in November 2015.
Separately, the campaign for Britain to leave the EU is now being backed by 250 business leaders, including the former chief executive of HSBC Bank, as executives debate the economic impacts of an exit before a June 23 referendum. Last month, the heads of more than a third of Britain’s biggest companies, including Shell and BT, said that leaving the EU would put jobs and investment at risk.
This report was compiled by Bank of Valletta plc for general information purposes only.