Inflation in the eurozone picked up in April, with the cost of food remaining high. But after subtracting the volatile prices for food and energy, the underlying inflation rate eased for the first time in 10 months.

Headline inflation rose to an annual rate of seven per cent from 6.9 per cent, slightly above the consensus of staying flat.

This was entirely due to energy inflation, which rose to an annual rate of 2.5 per cent from -0.9 per cent, whereas food inflation fell to an annual rate of 13.6 per cent from 15.5 per cent. Core inflation declined to an annual 5.6 per cent from 5.7 per cent, in line with estimates.

Following Russia’s invasion of Ukraine last year, energy prices soared, underpinning consumer prices across the single currency bloc, hitting a peak of 10.6 per cent in October.

Inflation later fell thanks to a slowdown of energy price rises but remains well above the European Central Bank’s two per cent target. The ECB on Thursday raised interest rates by a quarter of a percentage point to curb inflation.

Meanwhile, at the Federal Reserve’s monetary policy meeting last Wednesday, policymakers voted unanimously to raise interest rates by a quarter of a percentage point, the tenth rate hike since March 2022.

In the widely expected move, the Fed raised its benchmark borrowing rate by 0.25 percentage point to a range of 5.0 to 5.25 per cent, the highest in 16 years.

The rate sets what banks charge each other for overnight lending but has a direct impact on many consumer debt products such as home loans, car loans and credit cards.

“We’re no longer saying that we anticipate additional interest rate increases”, Fed chairperson Jerome Powell said at a press conference, calling it a “significant change”, thereby signalling a potential pause. However, he refused to rule out further action, saying: “We’ll be driven by incoming data.”

Finally, activity in UK manufacturing firms fell in April, as subdued demand and customers cutting costs took their toll, according to a closely-watched survey.

The final S&P Global/CIPS UK manufacturing Purchasing Managers’ Index (PMI) inched down to 47.8 in April from 47.9 in March, reaching a three-month low and still below the 50 threshold that separates growth from contraction in the sector.

Commenting on the latest survey results, Rob Dobson, director at S&P Global Market Intelligence, said: “The UK manufacturing sector remained in the doldrums at the start of the second quarter. Output and new orders contracted, as manufacturers felt the impacts of client uncertainty, destocking and tightening cost controls.”

This article does not constitute legal and/or financial advice and is being issued for information purposes only by Bank of Valletta plc, 58, Zachary Street, Valletta. Bank of Valletta is a public limited company regulated by the MFSA and is licensed to carry out the business of banking and investment services in terms of the Banking Act (Cap.371 of the Laws of Malta) and the Investment Services Act (Cap.370 of the Laws of Malta).

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