US trade deficit rises, central banks keep rates unchanged

You know that the global economy is expanding again when you see the US trade deficit rising. From Bloomberg:

The U.S. trade deficit widened in July and imports gained by a record 4.7 percent, signaling a revival of commerce as the global recession eased.

The gap between imports and exports grew 16 percent, the most in more than a decade, to $32 billion from a revised $27.5 billion in June that was larger than previously estimated, the Commerce Department said today in Washington. In another sign the U.S. slump may be ending, a Labor Department report showed jobless claims last week fell to the lowest level since July.

Despite the improvement in the global economy, most central banks remain reluctant to tighten monetary policy.

The Reserve Bank of New Zealand left interest rates unchanged on Thursday and is likely to keep interest rates low, as Bloomberg reports:

New Zealand’s central bank kept its benchmark interest rate unchanged and said further cuts remain possible amid a “patchy recovery” from the worst recession in three decades.

“We continue to expect to keep the cash rate at or below the current level for some time,” Reserve Bank Governor Alan Bollard said in a statement in Wellington today after leaving the official cash rate at a record-low of 2.5 percent.

The Bank of England followed a similar script. From Reuters:

The Bank of England left interest rates at a record low of 0.5 percent for the sixth month running on Thursday and stuck with its programme of asset purchases to steer the economy towards recovery.

As did the Bank of Canada. From Bloomberg:

The Bank of Canada kept its key interest rate at a record low and said persistent strength in the country’s dollar is threatening to derail growth that may be faster in the second half of the year than it earlier forecast.

The target rate for overnight loans between commercial banks remained at 0.25 percent, a move predicted by all 21 economists surveyed by Bloomberg. Governor Mark Carney repeated a commitment made in April to keep that rate unchanged through June 2010 unless the inflation outlook shifts.

The most hawkish noise on Thursday came from the Bank of Korea. From Reuters:

Bank of Korea sent a strong signal on Thursday it would lift interest rates if house prices climb much more, even if it means jumping the gun on other major central banks, boosting bets on a rise as early as November...

The central bank, as expected, on Thursday kept interest rates at the 2.0 percent record low set seven months ago to protect Asia's fourth largest economy from the global downturn.