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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: orkrious who wrote (25222)	3/9/2005 5:48:12 PM
From: mishedlo	Respond to of 116555

Reserve Bank of NZealand raises official cash rate 25 basis pts to 6.75 pct Wednesday, March 9, 2005 10:30:29 PM forexstreet.com SYDNEY (AFX) - The Reserve Bank of New Zealand said it has raised its official cash rate by 25 basis points to 6.75 pct, the first move in four months The central bank said it could not ignore the inflationary impact of strong labor growth, consumer spending and business investment, which have stretched the economy The rate rise, which contrasted with widely held expectations that interest rates would remain on hold, restores the margin New Zealand interest rates enjoy over the rest of the world The rate is the highest in the industrial world Reserve Bank governor Alan Bollard said with the economy remaining very strong and resources becoming increasingly stretched, the central bank assessed that a further tightening of policy is now necessary. "The momentum in today's economy is underlined by the continuing vigorous employment growth through December and by ongoing high levels of business and consumer confidence," Bollard said "Investment remains at record levels, our terms of trade remain very favorable and exports are generally holding up well despite the high exchange rate." Bollard said in the central bank's December and January reviews it emphasized that inflation is expected to remain toward the top of the 1.0-3.0 pct target band over the medium term, providing little headroom to absorb additional inflation pressures Those reviews also projected a near-term economic slowdown which was expected to constrain inflation Bollard said revised economic projections incorporate a stronger outlook for activity in the near-term with the projected slowing in growth now not occurring until later in 2005 "Whether there is any further tightening ahead will depend on how the risks play out over the coming period. Certainly, the current outlook offers little scope for an easing of policy in the foreseeable future," he said But, since the central bank's continues to hold the the view that the economy is close to a turning point, Bollard said it has to "carefully confront the possibility that a further tightening in policy at this stage of the cycle might exacerbate an eventual slowing in activity" Nevertheless, he said, not responding to the prospect of stronger inflation pressures now would make the task of containing inflation more difficult in the future, even if growth slows "The greater momentum in activity in the near term implies stronger underlying inflation pressures than we expected, he said, adding that today's additional tightening was required to contain these pressures," he said. Bollard said world demand and export prices are projected to moderate through 2005 while net immigration has slowed appreciably He said housing activity continues to ease, although temporarily held up by a mortgage price war last year Bollard said the pipeline effects from last year's policy tightening will continue to raise average effective mortgage rates through this year but the impact will be gradual

To: orkrious who wrote (25222)	3/9/2005 5:52:44 PM
From: mishedlo	Read Replies (1) \| Respond to of 116555

Fed´s Moskow: Gradual rate hikes appropriate - Wednesday, March 9, 2005 9:11:20 PM afxpress.com Fed's Moskow: Gradual rate hikes appropriate - UPDATE 2 CHICAGO (AFX) -- The Federal Reserve can continue to remove excessive U.S. interest-rate accommodation at a gradual pace, Chicago Federal Reserve President Michael Moskow said Wednesday. This policy remains appropriate because inflation -- and inflation expectations -- is still moderate, Moskow said in prepared remarks before the Investment Analysts Society of Chicago. "Given the low level of inflation, well-contained inflationary expectations and the remaining slack in the economy, we believe we can remove the remaining policy accommodation at a pace that is likely to be measured," Moskow said But, he told the gathering, the Fed must be ready to respond more quickly should there be warning signs of bubbling price pressures. The bond market was less confident that the Fed is a step or two ahead of inflation. Yields on benchmark 10-year notes surged to an eight-month high above 4.5 percent Wednesday. The bond market was responding in part to the latest "Beige Book" assessment of regional economic conditions issued by the U.S. central bank The report found that overall, "retail prices were generally flat or up modestly." However, a number of the 12 Fed districts reported "persistent pressures on input costs" although some noted that these pressures have eased since January. A number of districts also reported greater ease in passing along price increases. The Federal Reserve has said in its past several policy statements that interest rates can be lifted gradually, and it's done just that over the past six meetings -- bringing its target lending rate to 2.5 percent from a four-decade low of 1 percent in place last June. The central bank is widely expected to raise rates by another quarter-percentage point later this month. Moskow votes on interest rate policy in 2005 The Chicago Fed head said a relatively low unemployment rate is likely not a good representation of the amount of slack that persists in the U.S. job market The jobless rate stood at 5.4 percent in February, up from a three-year low of 5.2 percent in January. It peaked at 6.3 percent in June 2003 Part of the decline can be attributed to a modest increase in the number of discouraged workers, Moskow indicated, pointing out that some labor market slack is simply the result of the U.S. economy being unable to sustain the job growth of the 1990s. The unemployment rate, as tracked by the U.S. Labor Department, can fall if fewer people are counted in the pool of job-seekers "There is somewhat more slack in the labor market than the unemployment rate suggests -- but not much more," he said. "Combined with the moderate slack in other sectors of the economy, this suggests that the current level of output is only modestly below the level of potential output." But gauging the exact amount of economic slack is really a guessing game, according to Moskow "While we don't think that the gap has fully closed, we must be vigilant for any signs of emerging resource constraints generating inflationary pressures." Moskow downplayed the likelihood that rising oil prices will have a permanent impact on inflation. High crude is more likely to produce a spike in inflation, although because it may take some time for that spike to work all the way through the economy, "the inflation rate may be elevated for more than a short period." The April crude futures contract traded to an all-time high above $55 per barrel Wednesday.