In its monetary policy meeting last Wednesday, the Federal Reserve left interest rates unchanged but indicated that borrowing costs may still need to rise further by as much as half of a percentage point by the end of this year, as the US central bank reacted to a surprisingly resilient economy and stubbornly high inflation.

In an attempt to tackle inflation, which is still double the Fed’s target rate, policymakers have raised the central bank’s benchmark interest rate for 10 consecutive times since March 2022.  In a statement released after Wednesday’s meeting, the Fed said: “Holding the target range steady at this meeting allows the committee to assess additional information and its implications for monetary policy”.

Meanwhile, according to official data, industrial production in the eurozone rebounded in April, indicating that the manufacturing sector recovery is attempting a comeback. Industrial production in the countries that share the euro currency posted a monthly increase of one per cent, in line with expectations, partly retracing the 3.8 per cent fall seen in March.

However, a 14.7 per cent increase in capital goods output and a one per cent increase in energy production were the only components that added up to the expansion. On an annual basis, industrial output increased by just 0.2 per cent. It was expected to increase by 0.8 per cent by economists after falling by 1.4 per cent the previous month.

The second-quarter GDP does not look promising based on these facts. Despite a small increase in production in April, industrial output is still well below the first-quarter average.

Finally, in the UK, wages shot up as unemployment fell unexpectedly in April, signalling that the robust UK economy continues to defy efforts to cool demand and stave off inflationary pressures.

The figures published by the Office for National Statistics on Tuesday show that the number of employees and self-employed workers increased in the three months to April, raising the UK employment rate to 76 per cent, a record high. During the same time period, the unemployment rate fell to 3.8 per cent from 3.9 per cent in the preceding period.

Economists had forecast unemployment to rise to four per cent. On the other hand, average wages, including bonuses, grew by 6.5 per cent annually, which was much faster than the expected 6.1 per cent increase. As part of its ongoing efforts to bring inflation under control, the Bank of England will closely examine the April data.

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).