A much anticipated report on US inflation showed that consumer prices rose faster than expected in January, a sign of firming inflation that bolstered expectations of higher interest rates.

The Labour Department reported last week that the consumer price index grew by 0.5 per cent in the first month of the year against forecasts of a 0.3 per cent rise.

Excluding volatile food and energy prices, the so-called core measure of inflation increased by 0.3 per cent, also above forecasts for a 0.2 per cent rise.

Financial markets are monitoring US inflation for clues that the Federal Reserve may have to raise interest rates faster than expected. Last week’s inflation report followed earlier data showing accelerating US wage growth.

The report on wages had triggered days of volatility on the markets. Meanwhile, the eurozone economy sustained its solid growth at the end of last year, setting the stage for another robust performance in 2018 that may nudge policy makers at the European Central Bank to trim the monetary stimulus faster than expected.

European statistics agency Eurostat reported last week that GDP in the 19-nation currency union increased by 0.6 per cent from the previous three months. This confirmed a January 30 estimate.

Growth slowed in Germany and Italy, while the pace of expansion accelerated in the Netherlands and Portugal, according to separate reports.

Finally in the UK, the level of inflation remained unchanged in January, confounding expectations that it would start to fall as the year started.

The Office for National Statistics (ONS) said last week that the UK’s consumer price inflation rate stood at three per cent in January, unchanged from the level seen in December.

“Headline inflation was unchanged with petrol prices rising by less than this time last year. However, the cost of entry to attractions such as zoos and gardens fell more slowly,” ONS senior statistician James Tucker said.

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

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