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BOV Market Watch - Week ending 20th January 2023
23 Jan 2023

Eurozone inflation eases in December. Eurozone consumer price inflation slowed as expected in December, the European Union's statistics office Eurostat confirmed on Wednesday. The deceleration was thanks to a continued fall in energy prices that had earlier lifted it to record highs. Final inflation was confirmed at 9.2 percent year-over-year, down from 10.1 percent in November. Energy prices in the currency bloc were up 25.5 percent in December compared to the same month the prior year. This was down from the 34.9 percent year-on year growth the month before. Core inflation, that excluded food and energy prices, rose by 0.2 percentage points to 5.2 percent, in line with the consensus expectations and the initial estimate. However, ECB president Christine Lagarde, said "We shall stay the course until such time when we have moved into restrictive territory for long enough so that we can return inflation to percent in a timely manner."

U.S. economy 'relatively unchanged' with expectations for little growth ahead: Beige Book. The Federal Reserve’s (Fed) Beige Book, a compilation of anecdotal evidence on economic conditions in each of the twelve Fed districts showed economic activity little changed and growth outlooks still anaemic. Its results are used by the Fed’s rate-setting committee in its policy decision making. The Beige Book, said that five districts reported slight or modest increases in overall activity, six noted no change or slight declines, and one cited a significant decline. Some retailers reported more robust sales over the holidays while others noted that high inflation continued to reduce consumers' purchasing power, particularly among low and moderate-income households. As for inflation, while prices rose at a "modest to moderate pace" in most districts, many noted that the pace of increases had slowed thanks to continued easing in demand and supply chain issues, according to the report, which was based on information collected on or before January 9. Looking forward, contacts across districts expect year-ahead price growth to moderate further.

UK house price growth dropped in November. House prices in the UK rose by 10.3 percent in November compared with the same month in 2021, the Office for National Statistics (ONS) said on Wednesday. That is down from October's revised 12.4 percent rise. The typical UK house price was 295,000 British pounds, which was 28,000 British pounds higher than a year earlier but a slight decrease from the previous month's record high of 296,000 British pounds. On a monthly basis, house price inched up 0.1 percent in November, following an increase of 0.5 percent in October. Average prices in London remained the most expensive of any region in the UK, with an average price of 542,000 British pounds in November. However, the capital was the English region with the lowest annual house price inflation of 6.3 percent.

Despite speculation of shift, BOJ maintains ultra-easy monetary policies. Even amid the recent increased unpredictability on the part of the Bank of Japan (BOJ), there were no surprises on Wednesday as the central bank left its dovish policies unchanged. The BOJ kept its yield curve control (YCC) targets unchanged and left the short-term interest rate at an ultra-dovish minus 0.1 percent and the 10-year Japanese Government Bonds (JGB) yield around zero percent. The YCC policy is the centrepiece of the central bank’s effort to keep interest rates at record low and stimulate the ailing economy. In its quarterly report, the bank also revised its inflation outlook for the fiscal year ending in March, lifting it to three percent from 2.9 percent, as more companies are raising prices because of high import costs.

In case of any queries, please email us on [email protected] or call us on 2275 3857.

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Bank of Valletta p.l.c. 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).