The minutes of the December monetary policy-setting meeting of the Federal Reserve (Fed), that were published on Wednesday, showed that policymakers affirmed their resolve to tame inflation and, in an unusually blunt warning to financial markets, cautioned investors against underestimating the Fed’s determination to keep interest rates high until inflation is clearly on the decline.

The minutes put an emphasis on explaining that the decision to move to smaller interest rate hikes should not be interpreted by investors or the public as a weakening of the Fed’s commitment to bring inflation back to the bank’s two per cent target.

“Participants generally observed that a restrictive policy stance would need to be maintained until the incoming data provided confidence that inflation was on a sustained downward path to two per cent, which was likely to take some time,” the minutes said.

Meanwhile, eurozone producer price inflation cooled for the third month in a row in November, albeit remaining elevated, as energy prices rose at a slower pace, offering some solace to the European Central Bank that is likely to continue raising interest rates in the first quarter. Eurozone producer prices rose by just over 27 per cent annually in November, down from October’s 31 per cent increase.

The November figure is lower than economists’ forecasts that producer prices would rise by 28 per cent. On a monthly basis, producer prices fell by 0.9 per cent in November compared to October, when they were down by three per cent. Meanwhile, energy prices were still 55.7 per cent higher in November than a year earlier. They accounted for most of the year-on-year rise of the overall producer price index which is an early indicator of inflation trends at consumer level.

Finally, in the UK, mortgage approvals fell to their lowest level in two years in November as interest rate rises discouraged buyers, new Bank of England figures suggest. According to these figures, the number of mortgages approved by lenders sank from 58,000 in October to 46,000 in November – the lowest monthly total for mortgage

approvals since June 2020. The slump in mortgage approvals is evidence of a weakening property market due to rising borrowing costs, falling property prices and the negative consequence of last September’s mini-budget under then chancellor Kwasi Kwarteng.

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).