Saturday, 16 June 2007

BoJ leaves rates unchanged

The Bank of Japan left interest rates unchanged yesterday. The decision was expected. Furthermore, comments by BoJ governor Toshihiko Fukui yesterday provided no hint that there is any plan to raise rates next month.

A rate hike could still come later in the year though, as the Japanese economy continues to do reasonably well. The tertiary index, a gauge of spending on services, climbed 1.7 percent in April, the fastest pace in six months.
China could tighten even sooner after reporting that fixed-asset investment in urban areas rose 25.9 percent in the first five months from a year earlier.

But the Federal Reserve looks likely to stay on hold for some time to come, with yesterday's data not likely to change the view that inflation is still on a moderating path. From Reuters:

A steady rise in food and energy costs pushed overall U.S. consumer prices up 0.7 percent in May, the sharpest rise in 1-1/2 years, a government report showed on Friday.

But the core measure of the Labor Department's Consumer Price Index, which removes food and energy, rose just 0.1 percent, below Wall Street's median forecast of 0.2 percent...

The Fed reported that May industrial output was flat and that businesses were running at 81.3 percent of capacity last month, partly because utility companies cut output and auto producers turned out fewer new vehicles...

The [Reuters/University of Michigan] consumer sentiment index slipped to 83.7 in June from 88.3 in May and was far below forecasts for a reading of 88...

The Empire State general business conditions index jumped to 25.75 in June from 8.03 in May. Economists polled by Reuters had expected a 10.8 reading for June.

Even the Cleveland Fed's median CPI inflation moderated to 0.1 percent in May from 0.2 percent in April.

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