Eurozone consumer prices rose for the first time in six months in May, supporting the view that the measures taken by the European Central Bank (ECB) are helping the economy to move out of deflation.

The annual inflation rate rose to 0.3 per cent in May, up from zero per cent in April, the EU’s statistics agency Eurostat said last week. This was the first annual increase since last November and also the highest since October 2014, when prices rose 0.4 per cent. Economists had forecast a 0.2 per cent increase for May.

Energy prices fell at a slower pace. They were down five per cent in May from a year earlier, compared with an annual fall of 5.8 per cent seen in April.

The core inflation rate, which strips out volatile items such as food and energy, was up 0.9 per cent in the year to May from April’s 0.6 per cent. The ECB targets inflation below, but close to, two per cent over the medium term.

In the meantime, the International Monetary Fund (IMF) said last week that the Federal Reserve should wait until next year before raising its benchmark interest rate. Citing the stubborn persistence of low inflation, in its annual review of the US economy, the IMF said growth has been slower than it expected and reduced its 2015 outlook to 2.5 per cent, from 3.1 per cent it predicted earlier.

While growth is likely to strengthen in the coming months, the IMF said the Federal Reserve risked moving too quickly if it started raising rates this year.

Finally, according to the Federal Reserve’s latest assessment of economic conditions, known as the Beige Book, growth remains generally tepid, though real estate showed improvement and some areas are actually seeing labour shortages. Activity expanded at a “modest” to “moderate” pace over the past few months.

The report comes as the economy struggles to gain a solid footing after a weak first quarter and the Fed contemplates tightening its monetary policy. GDP contracted 0.7 per cent in the first quarter. Nonetheless, Wall Street expects the Fed to start tightening rates in 2015 for the first time in nine years.

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