BoE holds, PBC tightens

The Bank of England left interest rates unchanged yesterday. FT reports the decision and yesterday's UK economic data:

The cost of borrowing remained at 5.25 per cent on Thursday but a large majority of economists expect the Bank of England to deliver another increase in May.

The Bank’s decision not to change its main interest rate followed evidence that industrial growth is slowing and the housing market may be losing some of its vigour – and it suggests the Bank is prepared to wait and see whether the three previous increases since August have cooled demand...

The view that the Bank’s monetary policy committee would stay its hand this month had gained ground on Thursday morning after the Office for National Statistics said UK manufacturing output contracted unexpectedly in February.

The 0.6 per cent fall in output between January and February was the second month in a row the sector had shrunk and marked the biggest decline since October 2005.

After adding the mining and utility sectors, industrial production as a whole fell by 0.2 per cent month-on-month, a much weaker performance than analysts had forecast...

The Halifax said on Thursday that house prices rose by 1 per cent in March but that the the first three months of the year saw prices climb by 2.8 per cent compared to 4.2 per cent in the fourth quarter of 2006.

On the other hand, German industrial production rose 0.9 percent in February.

But if any cooling measures are needed, it is probably in Asia, and China delivered another one yesterday. From AFP/CNA:

China's central bank on Thursday ordered major commercial banks to set aside more money in reserves in an effort to slow its economy, the third of such cooling measure of 2007.

The People's Bank of China said in a statement the action was designed to enhance bank liquidity management and prevent excessively fast credit growth.

It said the required deposit reserve ratio for most commercial lenders would rise on April 16 by 0.5 percentage point to 10.5 percent.

The Indian authorities may have to do something soon too. From another AFP/CNA report:

India's inflation rate eased slightly to 6.39 percent, according to official data on Thursday, but remained far above the central bank's tolerance level.

The inflation rate fell to 6.39 percent for the week ended March 24 on the back of a fall in some food prices from 6.46 percent where it had been stuck for the previous three weeks, figures showed.