Key highlights of the week ended June 5

Source: Dukascopy Bank SA
Euro zone
For the first time this year, consumer prices across the 19-country currency bloc edged higher, easing fears that the Euro zone is set for a prolonged Japan-style era of deflation. Consumer prices across the Euro bloc climbed 0.3% last month from the year before, with energy prices becoming less of a drag. More surprisingly, core inflation, which excludes volatile components such as energy, food, alcohol and tobacco soared to 0.9%, the fastest rate since August 2014. In January, when the ECB announced its QE programme, Euro zone consumer inflation stood at minus 0.6%. Now, less than three months since bond purchases have begun, inflation has rebounded quickly to 0.3%. Nevertheless, inflation remains far below the ECB's target of below, but close to 2%. The ECB revised its inflation outlook, with consumer prices in the 19-nation bloc expected to climb 0.3%, 1.5% and 1.8% in 2015, 2016 and 2017, respectively. The gauge is seen staying low in the months ahead and accelerate its growth later in the year, Draghi said.

UK
The Bank of England decided to keep its benchmark interest rate at 0.5%, unchanged at the lowest level since 2009. All of the nine MPC's members voted unanimously to hold the UK interest rate in order to wait for recovery rebound. The decision was made mainly due to inflation rate in Britain that turned negative in April and came in at -0.1%, taken down in large part by the declines in oil prices. The officials of the central bank led by Mark Carney expect annual inflation to come back to 2% target by the beginning of 2017.

Australia
The Reserve Bank of Australia decided to keep interest rates unchanged, in line with analysts' expectations,opting to hold rather than risk further fuelling house price inflation in Sydney. The RBA cut rates in May, referring to sluggish business investment and slowing Chinese growth, following an earlier cut from 2.5% to 2.25% in February. Yet, economists predict a further rate cut could be on the table in the central bank's August meeting. However, the RBA is reluctant to cut rates further, doubting the efficacy of further reductions.
Australia's gross domestic product grew more than expected in the first quarter,as a pick-up in mining export volumes, household spendingand retail stock managed to offset sluggish investment. The Australian economy expanded at a robust 0.9% pace in the three months through March, justifying the Reserve Bank of Australia'sdecisionto keep interest rates on hold.

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