Fed leaves rates unchanged, RBI and Norges Bank tighten

As expected, the Fed left interest rates unchanged yesterday. Bloomberg reports:

The Federal Reserve kept its benchmark rate at 2 percent and warned that faster inflation may accompany some strengthening of the economy.

"Although downside risks to growth remain, they appear to have diminished somewhat, and the upside risks to inflation and inflation expectations have increased," the Federal Open Market Committee said in a statement in Washington after a two-day meeting.

But yesterday's economic reports remind us that the Fed probably won't be in any hurry to raise rates. From Bloomberg:

Sales of new homes extended their decline and orders for durable goods stagnated in May, underscoring forecasts that the Federal Reserve's first interest- rate increase since 2006 is still months away.

New-home sales fell to a 512,000 annual pace, the second- lowest level since 1991, the Commerce Department said today in Washington. Bookings for goods meant to last several years totaled $213.6 billion, the same as in April, Commerce reported. Both figures matched the median forecast of economists.

Meanwhile, though, other central banks continue to tighten monetary policy. Like India on Tuesday.

The Reserve Bank of India increased the repurchase rate by 0.5 percentage point late yesterday to 8.5 percent, the biggest move since 2000, and adjusted the cash-reserve ratio by a similar margin to 8.75 percent. A "heightened vigil" was needed to anchor inflation expectations, the central bank said in a faxed statement.

And Norway yesterday.

Norway's central bank raised its benchmark interest rate to 5.75 percent, the second increase this year, as it seeks to prevent accelerating wage and price growth.

Policy makers raised the overnight deposit rate by a quarter point, Oslo-based Norges Bank said in a statement on its Web site today. The decision had been expected by nine of the 20 economists surveyed by Bloomberg. Eleven had expected no change.

Elsewhere in Europe, the economic data also looked better yesterday, the euro area reporting a 2.5 percent increase in industrial orders in April while the Confederation of British Industry reported that retail sales fell less than expected in June.