The minutes of the most recent Federal Reserve (Fed) monetary policy meeting published last Wednesday show that officials were in no haste to change interest rates, even if the economy continued to strengthen.

Some committee members were worried about persistently low inflation. The Fed’s preferred gauge of price pressures, excluding food and energy, slowed to a 1.6 per cent increase in the 12 months through March, despite robust economic growth and low unemployment.

The Fed has an inflation target rate of two per cent. At the meeting, the Fed left its benchmark interest rate unchanged in a 2.25 per cent to 2.5 per cent target range and reiterated its pledge to be “patient” in weighing future interest rate moves.

Meanwhile, a recovery in eurozone business activity was weaker than anticipated this month amid a deepening contraction in the currency bloc’s manufacturing industry, which is increasingly hindering the services sector.

The IHS Markit Flash Composite Purchasing Managers’ Index (PMI), which is considered a good gauge to economic health, merely inched up to 51.6 in May from a final reading of 51.5 in the prior month. This is below a median expectation for a reading of 51.7.

The manufacturing PMI, on the other hand, fell to 47.7 in May from 47.9 in the previous month and below economists’ forecasts of 48.1. PMI readings above 50 imply expansion whereas readings below that figure mean contraction in the sector. At the same time, figures from Germany showed that manufacturing activity contracted for a fifth consecutive month in May.

Finally in the UK, figures from the Office for National Statistics showed that inflation, as measured by the consumer price index, stood at 2.1 per cent in April, up from 1.9 per cent in March, as energy and transport costs pushed the inflation rate back above the Bank of England’s (BOE) two per cent target rate.

However, the widely-anticipated spike is expected to be transitory, with the BOE forecasting inflation well below two per cent by August. Core inflation, which excludes volatile items such as food and energy, remained at 1.8 per cent, giving officials a reason to keep interest rates on hold amid the ongoing Brexit turmoil.

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