Europe - ECB & BOE 01 (May 08 - Nov 11)

[kennynah]

08 May 2008 08:21 GMT

BOE To Offer GBP15.3 Billion In Weekly Repo Thursday
LONDON -(Dow Jones)- The Bank of England said Thursday that it is offering a larger amount of funds at its weekly repurchase operation.

The central bank said it would supply GBP15.3 billion in funds maturing May 15, up from GBP12.56 billion at last week's auction.

The results of Thursday's weekly operation are due around 1125 GMT, shortly after Thursday's rate decision.

[kennynah]

08 May 2008 11:00 GMT

UK: BOE MPC keeps interest rates unchanged, as widely expected
- Bank rate remains at 5.00%- UK SONIA swap curve was pricing in a 20% chance for a 25 bp cut,
with most economists forecasting a 25 bp cut at the June MPC meeting.

Cable roughly unfazed at 1.9574 7pm singapore

Provided by: Market News International

[kennynah]

eur/usd at 1.5355.... little changed as decision is expected...discounted in advance

oil took a slight tumble ...dunno why ?... to just below 123pbl

08 May 2008 11:45 GMT
BULLET: ECB: Leaves rates unchanged, as widely expected......
ECB: Leaves rates unchanged, as widely expected
- Min. bid rate at refi tender remains at 4.00%- Marginal lending rate 5.00%, Deposit rate 3.00%
* Focus turns to the ECB press briefing which begins at 1230GMT.

[kennynah]

trichet speakin at 830 singapore time...all ears on whether he will soften his hawkish stand on rates...if he relents, eur will be pressured to weaken further...


08 May 2008 12:27 GMT

EURO-DOLLAR: Eases to $1.5340 area ahead of ECB Trichet press conf. at
the bottom of the hour with flows described as light as the pair eases
toward an "equilibrium" level, one trader says. Overnight lows under
$1.5300 saw some sovereign demand at a time when cable was rallying,
allowing euro a solid recovery into early NY trading but some supply
from macro accounts stems the rise, as does resting supply atop $1.5370.
Offers eyed to $1.5400, sell rallies still the M.O., but all eyes on
Trichet where any perception of a less hawkish stance will see euro
pressured, traders say.

[kennynah]

in a gist....trichet maintains Price stability as the #1 priority for ECB...thus maintains hawkish tone...

repeatedly spoke of "inflation"as worrisome...

this basically caused Crude Oil to rally in the last 10 mins...to 123.80..

gold followed suit a little...upwards...to 876.40 (jun contract)

[kennynah]

there's so much the BoE will cut rates further, due to rising inflation and especially when the exchequer spells it out...it'll make it even harder to lower rates going forward....cable should not slide further in the short term...

**************************

14 May 2008 08:09 GMT

LONDON (Thomson Financial) - British Chancellor of the Exchequer Alistair Darling admitted he is "worried" about the pressure on domestic inflation from soaring food and oil prices.

Darling told BBC radio that Britain was in the unusual position of facing external pressures on inflation.

He said higher oil prices were translating into increased transport costs and the rush to produce biofuels around the world was stifling supply of basic food products.

"Unusually for Britain what we have got at the moment is external, rather than home grown inflation if you like," he said.

Data released yesterday showed UK inflation rose by half a percentage point to 3 percent in April.

"I am worried about the inflationary pressure coming from oil, coming from food prices, but if you look at our inflation it is historically low and it is less than America and the euro area," he said.

The chancellor also denied that his plan to borrow 2.7 billion pounds to fund a 120 pounds tax cut for all basic rate tax payers would exacerbate the problem.

"I honestly don't think that what I announced yesterday is going to add to inflationary pressures," he said.

Darling was forced Tuesday into delivering a humiliating emergency budget to pacify members of his own party threatening to revolt over the government's decision to axe the 10 pence starting rate of tax.

While he insisted Wednesday morning that he had "not rewritten the budget", he acknowledged that "this whole business over 10p could have been handled better".

[HengHeng]

Personally i believe the bursting of the bubble is more important at the moment as compared to inflation. It is better to have inflation than to have zero/negative growth. From political point of view Brown is increasing getting unpopular over in UK after ousting Blair from his seat.

From what i read , the people are increasingly annoyed with his views be it on taxs reforms or to his economic proposals. Probably we might see more inflation but they might still carry on cutting rates due to slowing growth and thus pushing stirling down.

[kennynah]

and so...h2, u might just be right...our king is already pathing his way to let uk public to expect inflation to carry on...perhaps as u suggested to trade off with growth which might be more critical...given their ongoing housing problems..which seems to be escalating to become a crisis of some sort...

i leave cable alone and watch the story unfold... eur/usd to me is easier to gauge...

king is speaking now...

14 May 2008 09:36 GMT
BULLET: BOE KING: Undesirable to bring CPI back to target in.
BOE KING: Undesirable to bring CPI back to target in 12 months
- Aiming to bring CPI back to target over longer-term
- MPC not ignoring near-term rise in inflation
- MPC sees slowing demand growth needed this year

BOE KING: MPC facing most difficult challenge yet
- MPC must focus on bringing CPI to target in medium-term

BOE KING: Inflation shocks coming from rest of world
- SLS and monetary policy have different objectives

BOE KING: Starting to see slowdown in consumer spending

BOE KING: Will take time for credit conditions to improve
- Squeeze from energy, food affecting spending

14 May 2008 09:49 GMT
BOE KING: Will not fall prey to those who want Fed style cut
- House prices are likely to fall further
- Already seen significant adjustment in house prices
- New tax measure is of relatively modest impact

[kennynah]

be careful to be too certain about whether BoE will chop rates further...

inflation is a big f*cking problem, bigger than anyone expected...this is fresh news... no one expected or even suggested a 4% before...

this is going to shake things tonight at FTSE

********************

14 May 2008 09:47 GMT
BoE sees high risk of UK CPI inflation rising to near 4 percent by autumn 2008
LONDON (Thomson Financial) - The Bank of England has warned that inflation could rise up to 4 percent this year, more than two percentage points above target, even though it has effectively halved its predictions for economic growth.

In its quarterly Inflation Report, the central bank said its base case scenario is that the annual CPI inflation rate is likely to rise to around 3.6 percent this autumn because of higher energy and import costs -- subject to interest rates moving as the markets currently expect.

However, its fan chart, which shows the range of forecast probabilities, suggests that there's a real chance it could rise to 4 percent or even higher, a marked pick-up from the previous BoE projections in February.

If rates are left where they are, then inflation is seen falling to the 2.0 percent target, while GDP growth would fall below 1 percent this year and only recovering to just above 2 percent in two years time.

Whatever materialises, it looks like a dead-cert than the central bank's governor Mervyn King will have to write a letter to Chancellor of the Exchequer Alistair Darling explaining why inflation has risen by more than a percentage point above the 2 percent target. Figures for April, released yesterday, showed CPI inflation running at just short of letter-writing territory at 3 percent.

As if the inflation spike doesn't present enough problems, the BoE also warned that the UK economy is in danger of grinding to a halt this year, and possibly sinking into recession, as a result of the crisis in credit markets.

It said there is a high risk that GDP growth could fall to an annualised rate of 1 percent by the end of this year, the lowest levels since the early 1990s recession, even though the weaker pound should boost exports.

Its central projection is that growth will continue to moderate this year towards the 1 percent level before recovering at the start of next year, rising to around 2.4 percent on the two-year horizon.

The BoE's forecasts are based on the benchmark Bank Rate falling from the current 5.00 percent to 4.50 percent in a year's time, rising 4.60 percent the following year.

The BoE's latest economic projections clearly illustrate the dilemma it faces on interest rates. While above-target inflation would, under normal circumstances, indicate that borrowing costs have to rise, a stalling economy should herald lower rates.

Overall, the central bank conceded that risks to inflation rare on the upside, while those for growth are to the downside, at least in the medium-term.

It said that the rate-setting Monetary Policy Committee will be monitoring a range of data, in particular the extent to which above-target inflation becomes embedded in the economy.

"The Committee will concentrate on surveys of household inflation expectations and companies' pricing intentions, measure of inflationary pressures in the supply chain and data on wages and earnings," it said.

On growth, it said the key risks come from the weakening in real income growth as a result of above-target inflation and tighter credit both in the UK and abroad.

In gauging the extent of tightening in credit conditions and its impact on demand, the BoE said the MPC will focus particularly on the price and quantity of credit, asset prices, timely indicators of household and corporate spending, energy and food prices, UK import prices and the value of the pound.

Though the BoE suggested that lower house prices do not in themselves mean lower consumer spending, it warned that a sharper fall than the one currently being seen could make it more difficult for households to find credit.

"The impact on consumption could be further amplified if lower house prices coincided with a period of markedly lower income growth, for example if companies begin to shed labour," it said.

[kennynah]

a round up of what king said today...

inflation to top 4% ...expect 1 to 2 qtrs of negative growth...

MPC will have a difficult job of rate-setting..



14 May 2008 10:44 GMT
BoE's King says UK may well suffer 'odd quarter or two' of negative growth
LONDON (Thomson Financial) - The UK may well sink into a technical recession for the first time since the early 1990s even a inflation rises further above target, the Bank of England's governor Mervyn King warned.

In a press briefing, King acknowledged that the economy may experience an "odd quarter or two" of negative growth, but that he will likely have "plenty of opportunities to write letters" to Chancellor of the Exchequer Alistair Darling to explain why inflation is running so far above the 2.0 percent target.

"The Monetary Policy Committee is facing its most difficult challenge yet," King said, adding that inflation will return to target and growth will pick up, but that patience will be required.

The comments came after the release of the BoE's quarterly Inflation Report, which showed that CPI inflation may well touch 4.0 percent in the autumn, two percentage points above the target, just as growth will slump to an annual rate of 1.0 percent as households' real incomes are squeezed.

Still, King said the economic crisis will not be anywhere as bad as the 1930s depression, as sectors outside of finance and property are faring better.

The governor rejected any notion of changing the central bank's remit, stressing that changing the inflation target would not make the rate-setters' job any easier.

"This is not the moment to change the inflation target," he said.

Regarding the government's 2.7 billion pound tax giveaway yesterday, King said the measure was "relatively modest" in terms of its impact on the economy and inflation.

King said he was assured that Darling remains committed to the government's fiscal rules, adding that he will be interested to see what offsetting measures are announced by the Chancellor in his pre-budget report this autumn.

The governor noted that the 50 billion pound Special Liquidity Scheme unveiled by the Bank last month has been successful so far in stabilising confidence in the financial sector, but he warned that markets remain fragile.

Paul Tucker, the BoE's executive director of financial markets and a member of the MPC, conditions have improved compared with six to eight weeks ago and noted that some risk appetite is returning, notably in the acquisition of assets above fire-sale prices.