Wednesday, 21 March 2007

Rate change: Not in Japan, probably not in US, maybe in UK

As expected, the Bank of Japan left interest rates unchanged yesterday. AFP/CNA reports:

The Bank of Japan on Tuesday played down concerns about the health of world markets and the US housing sector as it left its benchmark interest rate on hold at 0.5 percent as expected.

BoJ governor Toshihiko Fukui said the central bank would closely monitor global equity markets but suggested that the recent worldwide sell-off had been a necessary adjustment after earlier sharp rises.

According to Reuters, economists expect a similar decision from the Federal Reserve later today. The mixed housing data yesterday is unlikely to affect the decision.

The pace of U.S. home construction rose a sharp 9 percent in February but permits for future building slid, according to data on Tuesday that shed little light on whether the housing market was stabilizing...

Building permits, which signal future construction plans, fell 2.5 percent...

Instead, the next rate hike could come from the Bank of England. From FT:

Stronger-than-expected inflation and consumer borrowing data released on Tuesday have increased the chances of another hike in the cost of borrowing...

The Office for National Statistics said its index of consumer prices rose by 0.4 per cent between January and February, primarily nudged higher by an increase in air fares, much of which came from the chancellor’s hike in passenger duty announced in December.

This took the annual inflation rate to 2.8 per cent, slightly higher than the 2.7 recorded in January and the tenth consecutive month that CPI has been above the Bank’s 2 per cent target...

The Building Societies Association said that mortgage approvals climbed from £4.2bn in January to £4.92bn last month. Gross lending rose from £4.06bn to ££4.21bn over the same period.

BSA director general Adrian Coles said: “Yet again building societies saw record lending in February, with gross lending the highest ever recorded for that month. Approvals - loans agreed but not yet made - were also the highest February on record.”

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