PBC raises rates, BoC holds

Bloomberg reports that China has raised interest rates again.

China’s central bank guided its benchmark one-year bill yield to the highest level in 14 months to curb record loan growth and prevent bubbles in the nation’s property and stock markets.

The People’s Bank of China sold the bills at a rate of 1.9264 percent in open-market operations, according to data compiled by Bloomberg. The yield increased eight basis points, the same as last week, after five months during which the benchmark was left unchanged.

However, despite Canada's index of leading indicators posting its biggest gain in almost 27 years, the Bank of Canada did not change its stance on interest rates on Tuesday.

The Bank of Canada left its benchmark interest rate at a record low and repeated a pledge to leave it unchanged through June as a strong currency and weak U.S. demand slow an economic recovery.

The target rate for overnight loans between commercial banks remained 0.25 percent, where it’s been since April, as expected by all 26 economists surveyed by Bloomberg.

With most of Tuesday's economic reports from the major economies somewhat negative, the BoC's caution may be warranted.

US homebuilder confidence unexpectedly fell in January.

Confidence among U.S. homebuilders unexpectedly dropped in January to the lowest level since June, a sign the housing recovery may stall in coming months.

The National Association of Home Builders/Wells Fargo index of builder confidence decreased to 15 from 16 the prior month, the Washington-based group said today. Readings below 50 mean most respondents view conditions as poor.

Japanese consumer confidence slumped to a six-month low in December.

Japan’s household sentiment fell to a six-month low in December, indicating the need for measures to stimulate consumer spending and sustain a recovery from the country’s worst postwar recession.

The confidence index dropped to 37.6 last month from 39.5 in November, the Cabinet Office said today in Tokyo. The government lowered its assessment of the report, describing sentiment as “weak.”

Also down is German investor confidence.

German investor confidence declined more than economists estimated in January as the economic recovery showed signs of losing momentum.

The ZEW Center for European Economic Research said its index of investor and analyst expectations, which aims to predict developments six months ahead, fell to 47.2 from 50.4 in December, its fourth straight drop. Economists expected it would ease to 50, according to the median of 37 forecasts in a Bloomberg News survey.

About the only thing up was UK inflation.

The U.K. inflation rate jumped in December by the most since records began in 1997, posing a challenge to policy makers as they consider when to start raising interest rates.

Consumer prices climbed 2.9 percent from a year earlier, 1 percentage point more than in November, the Office for National Statistics said today in London. The rate rose after oil prices jumped and 2008 cuts in sales tax and retail prices weren’t repeated. The pound extended gains after the release.