As expected, the Bank of Japan kept interest rates unchanged yesterday. FT reports:
The BoJ kept interest rates at 0.25 per cent on Thursday, after a disappointingly low headline inflation rate of 0.2 per cent in September. However, [central bank governor Toshihiko] Fukui has made it clear the bank is prepared to move pre-emptively against inflation, even if there are no obvious signs of pricing pressure in the core consumer price index.
A fall in the demand for services in September probably factored in the BoJ decision, Bloomberg reporting on Wednesday that the tertiary index dropped 1.3 percent from a month earlier and 0.7 percent for the three months to September, the biggest quarterly drop since 1998.
Inflation has been low in the United States recently as well. Reuters reports the economic news from the US yesterday.
A fall in energy prices helped drive U.S. consumer prices down by a more-than-expected 0.5 percent in October and even stripping away volatile food and energy costs, prices were up only 0.1 percent, according to a Labor Department report on Thursday...
A separate Labor Department report showed little change in labor market conditions. The number of workers signing up for jobless benefits inched down to a seasonally adjusted 308,000 last week from 310,000 the prior week. The four-week average of these claims, which irons out weekly fluctuations, inched up to 313,750 from 311,750.
On the industrial front, however, output at U.S. factories, mines and utilities rose a smaller-than-expected 0.2 percent in October, as production of motor vehicles dropped for the second month in a row.
Factory production fell 0.2 percent as output at motor vehicle plants sunk 3.9 percent last month and more than 10 percent from the same time a year ago, according to Fed data...
Another survey of manufacturing showed a rebound in activity in the Mid-Atlantic region during November. According to the Philadelphia Federal Reserve Bank, business at factories in that region rebounded in November after contracting for the past two months, in line with Wall Street expectations.
However, an index for new orders in that report, which is seen as a key gauge of future growth, fell and the six-month business outlook slipped.
Another regional survey released the day before, the Empire State Manufacturing Survey, had shown that the general business conditions index for New York climbed for a third consecutive month to 26.7 in November, its highest level since June.
As for inflation, Calculated Risk remarks that monthly CPI "is a very noisy series" and that he prefers the Cleveland Fed's median CPI, which showed a less-benign 0.3 percent increase for October.
But more good news -- relatively speaking -- came in the form of improved home builder confidence.
[H]ome builder confidence in November edged up for the second consecutive month, according to the National Association of Home Builders/Wells Fargo Housing Market Index (HMI), released today. The HMI gained two points from the previous month to stand at 33.
There was also inflation news from the euro area. Bloomberg reports:
Consumer prices rose 1.6 percent from a year earlier, below the 1.7 percent gain in September and matching the estimate published Oct. 31, Eurostat, the European Union's statistics office in Luxembourg, said today. The October inflation rate is the lowest since February 2004...
Excluding volatile energy, food and tobacco prices, the so- called core rate of inflation was 1.5 percent in October, unchanged from the previous month.
But the ECB is still widely expected to raise rates further, even with the news the day before that seasonally-adjusted industrial production in the euro area fell 1.0 percent in September, reversing the strong 1.7 rise in August.
Even China is cooling. On Wednesday, Xinhua Online reported that China's year-on-year growth rate in industrial production fell to 14.7 percent in October, down 1.4 percentage points from September, while yesterday, Reuters reported that annual growth in Chinese fixed investment eased more than expected in the first 10 months to 26.8 percent, down from 28.2 percent in the first nine months and a peak of 31.3 percent in the first half.
The data from the UK have been more contradictory. On Wednesday, Reuters reported that average earnings growth in the three months to September slowed to its weakest rate since January while the jobless rate rose to its highest in more than six years, although the number of people claiming jobless benefits rose by less than expected in October.
Yesterday, however, it reported that house prices rose at the quickest pace in more than four years during the three months to October. And retail sales rose 0.9 percent in October, their fastest monthly pace in almost a year and reversing September's 0.4 percent drop, though the price deflator eased to stand 0.1 higher percent on a year ago compared with September's upwardly revised 0.7 percent rise.
The Bank of England, however, expects inflation to rise in the near term. From Reuters:
Inflation will likely rise further above its 2 percent target in the near term before falling back to meet it, Bank of England Governor Mervyn King said on Thursday in a speech that repeated comments in the Inflation Report.
Possibly. And hopefully, when it does fall, consumer price inflation stays down longer than house price inflation did.