US consumers experienced a robust rise in prices at the start of the year, a sign of persistent inflationary pressures that could push the Federal Reserve (Fed) to raise interest rates even higher than economists are predicting.
The Labour Department’s Consumer Price Index (CPI) climbed 0.5 per cent last month, exceeding expectations of a 0.4 per cent gain and after rising by 0.1 per cent in December. The CPI was up 6.4 per cent on a yearly basis, marginally down from 6.5 per cent in December and more than the 6.2 per cent economists predicted.
The core rate, which excludes food and energy prices, rose 0.4 per cent in January and was up 5.6 per cent on the year, but easing from 5.7 per cent in December.
The January inflation data was closely watched after an unexpectedly strong jobs report fuelled expectations that the Fed will have to raise interest rates more aggressively.
Separately, the UK’s annual inflation rate fell for a third month in a row in January, easing pressure on the Bank of England to raise interest rates. However, inflation stayed in double digits and close to its highest levels for 40 years.
A report by the Office for National Statistics (ONS) shows that inflation in Britain hit 10.1 per cent in January, below economists’ expectations, but high food and energy prices continued to put the pressure on households.
Core CPI, which does not include food, energy, alcohol or tobacco, came in at 5.3 per cent compared to 5.8 per cent in December, according to the ONS.
Chancellor Jeremy Hunt warned that the “fight is far from over” on rising prices and said it was why the government “must stick to the plan to halve inflation this year, reduce debt and grow the economy”.
Signalling weak economic activity towards the end of the year, eurozone industrial production fell more than expected in December, suggesting that the currency bloc is on the brink of a recession.
Industrial output in the eurozone fell by 1.1 per cent month-on-month in December, following an increase of 1.4 per cent in November, Eurostat data showed. The figure was worse than economists’ estimates of a 0.8 per cent decline for the month.
“The contraction was mainly triggered by German industry, in contrast to significant gains in France and Italy. The main industry groupings showed that the weakness was widespread across sectors, with only the energy subcomponent to post a gain,” a note by Oxford Economics said.
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).