Rates cuts are coming! It's June 25, 2003

limerickman

Market Preview: ECB fears inflation more than slowdown
By Neil Dennis

Published: December 2 2007 16:37 | Last updated: December 2 2007 16:37

Investors discover this week whether turbulent trading conditions and tight money markets have influenced the interest rate-setting committees of both the Bank of England and the European Central Bank.

Jean-Claude Trichet and his fellow governing council members at the ECB will continue to be more concerned about inflation when they meet on Thursday. Consumer price data last week showed the eurozone consumer prices index rose to 3 per cent in November, the highest level since 2001.

This will have disappointed interest rate doves, as most analysts now believe eurozone rates will be on hold at 4 per cent well into next year, in spite of signs of slowing growth.

“The eurozone economy has entered a difficult period in which rising inflation will prevent the ECB from responding quickly to a further slowdown in activity,” says Jonathan Loynes at Capital Economics.

No change is expected by the Bank of England, but a case can be made for a quarter-point cut to 5.5 per cent, says Global Insight’s Howard Archer. “The bank does not want to see too sharp a slowdown in growth, and is very aware of the danger of this occurring.”

In parliamentary testimony last week, Bank of England governor Mervyn King said the UK economy faced an uncomfortable short-term future.

Mr King and his monetary policy committee colleagues will be given an idea of how well growth has held up under recent challenging conditions with the publication of purchasing managers’ surveys for November.

The manufacturing index, out today, is widely expected to remain above the 50 level, meaning the sector is still growing. The services sector index is expected to nudge higher after October’s fall to a 53-month low of 53.1.

The Federal Reserve’s policy meeting on December 11 will be informed by this week’s economic numbers as purchasing managers provide data on manufacturing (today) and the service sector (Wednesday).

The main event in the US, however, is November non-farm payrolls data, which are expected to show the rate of job creation slowing.

After October’s 166,000 rise in payrolls, estimates for November range between 50,000 to 80,000 after a poor run in weekly jobless claims. Slower consumer spending is expected to have hit retail employment, while trade and construction jobs are feared to have suffered from the US housing slowdown.

Rate decisions are due tomorrow from Canada, which is expected to hold at 4.5 per cent, and Australia (no change at 6.75 per cent). New Zealand, on Wednesday, is expected to leave its main rate at 8.25 per cent.

__________________
.."But finally the last thing I’ll say to the people who don’t believe in cycling, the cynics and the sceptics. I'm sorry for you. I’m sorry that you can’t dream big. [I]I'm sorry you don't believe in miracles. You should believe in these athletes, and you should believe in these people. I'll be a fan of the Tour de France for as long as I live. And there are no secrets" - this is a hard sporting event and hard work wins it - Armstrong 2005 TDF
morelike hypocrisy.

Crankyfeet

You were right Lim. Calm reason wins again.

limerickman

Lest we forget................



ECB leaves rates unchanged
By Ralph Atkins in Frankfurt
Published: January 10 2008 12:46 | Last updated: January 10 2008 12:46

Eurozone official interest rates were left unchanged on Thursday by the European Central Bank but its worries about the inflation outlook are likely to remain.
The decision by the ECB’s governing council, meeting in Frankfurt, to leave its main policy rate at 4 per cent was expected. The global credit squeeze last year forced the bank to shelve further rises in official borrowing costs, which have remained unchanged since June.


and in Britain



Bank of England holds rates steady
By Delphine Strauss
Published: January 10 2008 12:00 | Last updated: January 10 2008 12:31

The Bank of England left interest rates unchanged at 5.5 per cent on Thursday, opting to take more time to assess the extent of the slowdown in the economy and of inflationary pressures.
The decision matched most analysts’ expectations - only ten of fifty economists polled by Bloomberg thought the Bank’s monetary policy committee would vote to reduce rates for a second consecutive month. But short sterling futures fell after the news as markets had priced in a higher possibility of a cut.


Seems like the blackops/grandcaymanislands/"end is nigh"/"my man in cayman/secretheinverbruggenchaired/ monetary meetings were a figment of someones overactive imagination.

__________________
.."But finally the last thing I’ll say to the people who don’t believe in cycling, the cynics and the sceptics. I'm sorry for you. I’m sorry that you can’t dream big. [I]I'm sorry you don't believe in miracles. You should believe in these athletes, and you should believe in these people. I'll be a fan of the Tour de France for as long as I live. And there are no secrets" - this is a hard sporting event and hard work wins it - Armstrong 2005 TDF
morelike hypocrisy.

limerickman

ECB holds rates at 4% despite slowdown
By Ralph Atkins in Athens

Published: May 8 2008 12:45 | Last updated: May 8 2008 12:45

[COLOR=Black]Eurozone interest rates have been left unchanged as the European Central Bank keeps up its battle against inflation, even as the economy slows.

Meeting in Athens on Thursday, the ECB’s governing council left its main policy rate unchanged at 4 per cent – as it has every month since last June. The ECB remains alarmed about inflation trends, especially with oil prices soaring to record highs, and is not as concerned about a possible downturn in economic growth as the US Federal Reserve.


Meanwhile, Jean-Claude Trichet, ECB president, is expected at his press conference later on Thursday to remain relatively upbeat about growth prospects.
Eurozone growth in the first quarter of this year is thought to have remained robust.
However, forward-looking surveys have pointed to a significant weakening in months ahead and the performances of the main eurozone economies appear to be diverging.

Spain is expected to slow dramatically as house prices fall and construction activity is hit. France’s economy has also shown signs of softening significantly. Germany, however, continues to shows signs of resilience – although weak figures for manufacturing orders released this week also pointed to a slowdown ahead.

Earlier on Thursday data released by Germany’s economy ministry showed the country’s industrial production fell as expected in March, hit by weaker construction output as the sector eased after profiting from mild weather earlier in the year.

Mr Trichet’s comments will be followed closely for any hints of fresh co-ordinated action by the world’s central banks – either to help relieve tensions in financial markets or to influence foreign exchange markets. Signs have emerged that the US and eurozone authorities have moved significantly closer to a common position on the desirability of a strong dollar.

By meeting in Athens, the ECB might draw particular attention to the Greek economy, which, with its massive current account deficit, faces the risk of a possibly painful adjustment. The ECB’s governing council meets twice a year outside its home town of Frankfurt.



.........................and the BOE



Bank of England holds rates at 5%
By Delphine Strauss

Published: May 8 2008 12:00 | Last updated: May 8 2008 12:00

The Bank of England’s monetary policy committee left interest rates unchanged at 5 per cent on Thursday suggesting it does not yet think the UK economy has slowed enough to bring inflation back to target in the medium term.

The Bank had been widely expected to hold fire after its quarter-point rate cut in April. Markets had priced in only a small chance of a cut, although investors are betting on a strong probability of rates coming down in June


“With inflation likely to record a sustained breach of 3 per cent later this yearthe MPC has paid more than the usual amount of attention to explaining its actions, and seems most comfortable reducing rates when it’s expected to do so,” said Malcolm Barr, economist at JPMorgan.

The MPC’s task has become more difficult in recent months as higher oil, gas and import prices threaten to drive inflation further above target in the short term, but mounting evidence of an economic slowdown exacerbated by the credit squeeze raises the risk of inflation undershooting its target in the medium term.

Minutes of the MPC’s April meeting showed the committee was divided in its judgement of how the balance of risks had changed, but several members have recently stressed the risk of higher inflation, and played down the implications of falling house prices for consumer spending.

Mervyn King, the Bank’s governor, said last week inflation was likely to rise above 3 per cent for longer than it did last year, and noted that a period of below-trend growth would not be “a disaster in itself”.

When the Bank publishes its latest forecasts for growth and inflation in next week’s Inflation Report, it is likely to show that the outlook for both has worsened since the February report.

“The stage is set for a fairly flinty message from the MPC: weaker growth, rising inflation and little scope for easing,” predicts Michael Saunders, economist at Citi.

“The total effect is likely to be slightly weaker growth and markedly higher inflation for 2008-09,” he added – implying that the economy will need to slow more sharply than the MPC thought in February to return inflation to target over time

__________________
.."But finally the last thing I’ll say to the people who don’t believe in cycling, the cynics and the sceptics. I'm sorry for you. I’m sorry that you can’t dream big. [I]I'm sorry you don't believe in miracles. You should believe in these athletes, and you should believe in these people. I'll be a fan of the Tour de France for as long as I live. And there are no secrets" - this is a hard sporting event and hard work wins it - Armstrong 2005 TDF
morelike hypocrisy.

Crankyfeet

I bet you rates come down sometime in the next 30 years though Lim...

TheDarkLord

It is actually quite likely to happen soon. The inflation is rising, but growth is also slowing. Keeping the rate fixed ensures that the growth will slow down even more. Whether the rates go down in the immediate future depends on how much the growth slows down.