The minutes of the Federal Reserve’s (Fed) latest monetary policy meeting held on April 28 to 29 noted that, in addition to the severely adverse near-term effects of the coronavirus pandemic, the severe measures undertaken to contain it have created an extraordinary amount of uncertainty and considerable risks to economic activity in the medium term. The minutes indicated that more action is likely ahead though they did not specify when.

Members said “further clarity” on asset purchases might be needed “later this year.” After slashing its benchmark interest rate to near zero as the coronavirus pandemic took hold, the Fed’s monetary policy committee voted to keep the rate in a range between zero per cent and 0.25 per cent and not move it until a recovery is firmly in place.

Meanwhile, eurozone consumer confidence recovered slightly in May as several countries in the single-currency bloc started removing restrictions placed during the lockdown to curb the spread of the coronavirus, estimates from the EU showed. Eurozone consumer confidence rose by 3.2 points in May from the April number. The European Commission said the flash estimate showed that eurozone consumer morale improved to -18.8 this month from -22.0 in April. Economists forecast a fall to -24.0. The corresponding index for the whole of the EU rose to -19.5 from -22 in the prior month. However, both indicators remained far below their long-term averages of -11.1 and -10.4, respectively.

Finally, in the UK, the inflation rate fell in April to its lowest level since August 2016 as the economic fallout of the first month of the lockdown hit prices. The Consumer Prices Index, or CPI, slowed to 0.8 per cent in April from 1.5 per cent in March, the Office for National Statistics (ONS) said. Cheaper fuel prices and lower energy bills were the dominant factors pushing inflation lower. But the prices of games and hobbies rose, which the ONS said may be due to people spending more time at home. This was the first CPI reading below one per cent since 2016 and the lowest reading since August of that year, when prices had started to accelerate following the depreciation of sterling that made imports more expensive.

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

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