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

To: Haim R. Branisteanu who wrote (30686)	5/24/2005 2:42:52 PM
From: Crimson Ghost	Read Replies (1) \| Respond to of 116555

Stagflation in other words.

To: Haim R. Branisteanu who wrote (30686)	5/24/2005 2:56:42 PM
From: mishedlo	Respond to of 116555

Microsoft faces $5m-a-day fine after warning Microsoft was publicly warned on Monday that it has one more week to comply with the antitrust sanctions imposed by the European Commission last year, or face fines of up to $5m a day. The US software group has until the end of this month to hand in a final proposal saying how it intends to implement the Commission ruling. Should the proposal fail to meet the Commission's demands, Brussels can impose fresh financial penalties. news.ft.com

To: Haim R. Branisteanu who wrote (30686)	5/24/2005 3:17:27 PM
From: mishedlo	Read Replies (1) \| Respond to of 116555

China rejects US demand for revaluation By Richard McGregor in Beijing Published: May 24 2005 18:31 \| Last updated: May 24 2005 18:31 China rejected on Tuesday a detailed prescription from Washington for a quick move to a more flexible exchange rate system, beginning with a 10 per cent revaluation of the renminbi. The US proposal also generated scepticism from China-based analysts, who said a large one-off revaluation would run against the gradualist traditions of Chinese policymaking and undermine the government's mantra of exchange rate “stability”. A foreign ministry spokesman, in response to questions about a Financial Times report that the US Treasury had made a revaluation demand via unofficial envoys, said many US visitors had come to China recently carrying “such messages” about revaluation. But he repeated Beijing's view that it would not bow to foreign pressure on the issue. “China will not do this when internal conditions are not ripe, no matter how great the external pressure is,” said the spokesman, Kong Quan. China has long said it will dump the decade-old peg to the US dollar in favour of a more flexible exchange rate system, but it has not commented on the timing of such a move. Ha Jiming, chief economist at China International Capital Corporation, the country's largest investment bank, said that, although the timing was right for a change in currency policy, 10 per cent was too large a move at the beginning. “It remains too risky to relax the peg too much, so China may well start from a 5 per cent revaluation then repeg the renminbi to a basket of currency,” said Mr Ha. Zuo Xiaolei, chief economist with Galaxy Securities, said the currency had now become a political rather than economic issue, militating against a large move. “The making of decisions in China is mostly consensus-based . . . so that might lead to a compromise of a 3 to 5 per cent rise in the renminbi's value.” ¦ European Union and Chinese trade officials were on Tuesday discussing ways to avoid a potentially damaging stand-off over textiles imports from China, writes Tobias Buck in Brussels. Peter Mandelson, the EU trade commissioner, last night met Gao Hucheng, China's special textiles negotiator. Mr Mandelson also discussed the issue with Bo Xilai, the Chinese commerce minister, earlier in the day. Failure to find a negotiated settlement would spark the imposition of unilateral safeguard measures by the EU to reduce Chinese shipments of T-shirts and flax yarn. news.ft.com

To: Haim R. Branisteanu who wrote (30686)	5/24/2005 3:20:21 PM
From: mishedlo	Read Replies (1) \| Respond to of 116555

Fed could hike rates for another year-SF Fed study yahoo.reuters.com Tue May 24, 2005 11:59 AM ET CHICAGO, May 24 (Reuters) - If a "rule of thumb" about Federal Reserve monetary policy cycles holds true, the U.S. central bank could keep increasing interest rates for another year, a report from the San Francisco Federal Reserve said. From 1984 to 2005, once the Fed embarked on a new policy direction it typically raised or lowered the key federal funds rate by some 3.75 percentage points over two years, said Oscar Jorda, visiting scholar at the bank and an associate professor of economics at University of California-Davis. "Suppose we take the 3.75 percent rule of thumb and apply it to the latest round of Fed increases," Jorda wrote in the bank's economic letter. "It would mean that the FOMC would continue to increase the funds rate up to 4.75 percent by June 2006." Jorda's study showed the Fed typically shifts rates by about 0.165 percent per month, or about 25 basis points per Federal Open Market Committee meeting, over 15 consecutive meetings. In the current tightening cycle the FOMC has raised rates by a quarter percentage point eight times, starting in June 2004. That has taken the fed funds rate to 3.0 percent from a highly accommodative 1.0 percent. The funds rate is at the bottom rung of what is often termed a "neutral" range of 3 percent to 5 percent, that neither promotes not stymies U.S. economic growth. Fed officials typically avoid being tied down on what constitutes a neutral rate. Last week, Fed Chairman Alan Greenspan said of neutrality, "we'll know it when we see it." However, the year-end fed funds rate of 3.70 percent implied by Eurodollar futures (EDZ5: Quote, Profile, Research) suggests the Fed will skip a rate hike at two of its remaining five meetings in 2005. The implied funds rate (EDM6: Quote, Profile, Research) by June 2006, Jorda's theoretical end-point of the current tightening cycle, is currently near 3.86 percent.