Minutes of the Federal Reserve (Fed) June meeting published on Wednesday show that officials were concerned that consumers were increasingly anticipating higher inflation and signalled that much higher interest rates could be needed to curb price increases.

Members said the July meeting would likely see another 50- or 75-basis point move on top of a 75-basis point increase agreed to in June. A basis point is one-hundredth of one percentage point.

However, Peter Cardillo, chief market economist at Spartan Capital Securities in New York, noted that “the declining commodity prices suggest that we probably have reached a peak in terms of energy prices, agricultural prices, and that’s good news in terms of inflation”.

Meanwhile, the Bank of England’s Financial Policy Committee (FPC) warned on Tuesday that the economic outlook for Britain and the rest of the world had worsened and told banks to increase their capital buffers to ensure they can weather the storm. The FPC pointed to Russia’s invasion of Ukraine for “sharply” intensifying

inflationary pressures, especially for energy and other commodities. It explained that in addition, financial conditions tightened significantly of late, as central banks around the world are tightening their monetary policy to control rising prices by boosting borrowing costs.

The FPC also noted that household debt relative to income has remained broadly flat in recent quarters. Nonetheless, the rise in living costs and interest rates will put increased strain on household finances in the coming months.

Finally, in Germany, industrial production rose less than expected in May as supply chain disruptions caused by the Russian invasion of Ukraine and pandemic-related lockdowns in China make it difficult to process orders, official data showed on Thursday. Output notched up 0.2 per cent on the month, less than the 0.4 per cent expected by economists.

However, statistics agency Destatis revised up April’s figures to show a gain of 1.3 per cent rather than the 0.6 per cent originally reported. With the monthly baseline revised higher, the level of output was broadly in line or even a little ahead of expectations. On a yearly basis, industrial output declined by 1.5 per cent in May after easing 2.5 per cent in April.

 This article has been prepared by Bank of Valletta plc for general information only.