Mervyn King didn't seem to have many positive things to say yesterday. From Bloomberg:
Bank of England Governor Mervyn King said there's a risk a further drop in asset prices will lead to more deterioration of credit conditions.
"Market fears about the possibility of further movements in asset prices might impair the balance sheets of the banking system in the U.S., which would lead to a classic credit squeeze," King told U.K. lawmakers today. "This is a risk rather than something that's actually happened yet."
And this came as King and other policy-makers keep one eye on inflation.
... King said today that "the near- term outlook for inflation and growth has become less benign" and policy maker Timothy Besley said there's still "a fair amount of inflationary pressure out there."
Yesterday's UK economic data appear to bear this out. From Reuters:
British house prices fell in November at their steepest rate for 12 years and home loan approvals dropped to their lowest in nearly three years, boosting bets the central bank may cut interest rates next week...
Prices on the high street are soaring at their fastest rate in almost a decade, according to a report from the Confederation of British Industry which also showed retail sales growth picking up as the run-in to Christmas begins in earnest.
Meanwhile, today we have some rather mixed news from Japan, with core consumer prices finally seeing a rise in October -- by 0.1 percent from a year earlier -- but other data indicate that the outlook for domestic demand remains weak.
At least Japan's industrial production appears to be holding up. October industrial production rose 1.6 percent from a month earlier, an improvement that was also seen in the NTC Research/Nomura/JMMA Purchasing Managers Index rising to 50.8 in November from 49.5 in October.