As widely expected, the Bank of England and the European Central Bank kept rates unchanged, at 5% and 4.25% respectively. This is not surprising during times when the annual rate of consumer price inflation is well above its target, and it’s certainly a clear sign that the hard line approach with regard to inflation is due to go on for as long as price pressures continue.

Indeed it is, as Mervyn King has said, a difficult balancing act, but as long as inflation remains at the current levels, it is likely to continue being a significant concern for policymakers. Eurozone inflation is at a record level of 4.1 per cent – more than double the ECB’s medium-term goal of just under 2 per cent, and in the UK it could soon hit 5 per cent, nearly twice the central bank’s target.

Yesterday saw a nice upside surprise as US pending home sales rose unexpectedly to 5.3 per cent, while the market’s consensus was of minus 1 per cent. It was the highest reading for the index since October. Also out yesterday, initial jobless claims in the US showed some distortion in the number. According to official figures, the number of claims was 455k, however, claims have been affected by a federal program to extend unemployment benefits so the underlying trend is difficult to interpret at this stage.

For more information, please download today's HSBC Economic Update.