RBNZ Drops Rate 50bps, But Why? And So What?

So the Reserve Bank of New Zealand (RBNZ) did what most economists were expecting and cut the official cash rate by 50 basis points, back to 2.50%, as an emergency response to the earthquake. Was it the right thing to do? Probably. Will it result in a harder inflation challenge later on? Possibly. From a confidence perspective, the earthquake did make a dent, but even before the earthquake things weren't exactly booming. So on balance the move will likely be positive for the New Zealand economy through 2011.

http://seekingalpha.com/article/257489-reserve-bank-of-new-zealand-drops-rate-50bps-but-why-and-so-what

Will New Zealand Drop Interest Rates?

Will the Reserve Bank of New Zealand cut the official cash rate in reaction to the earthquake? For that matter, what is the likely impact of the earthquake, and how should you think about New Zealand investments?

http://seekingalpha.com/article/254805-will-new-zealand-drop-interest-rates

Economic Calendar - Week Starting 25 October 2010

Here's the Economic Calendar for the week commencing the 25th of October 2010. This week the main event is the US Q3 GDP report on Friday, the UK will also release its Q3 GDP data this week. In monetary policy New Zealand and Japan are both due to announce interest rate decisions this week. Japan also has a swath of key monthly data out such as employment, inflation, industrial production, and trade data. The US will also see its much Case-Shiller house price report, and consumer confidence numbers released this week.

(More commentary follows the table)

Day	Time (GMT)	Code	Event/Release	Forecast	Previous
SUN	23:50	JPY	Merchandise Trade Exports (YoY) (SEP)	9.6	15.5
SUN	23:50	JPY	Merchandise Trade Imports (YoY) (SEP)	7.4	17.9
SUN	23:50	JPY	Merchandise Trade Balance Total (SEP)	¥710.0B	¥86.0B
MON	09:00	EUR	EU Industrial New Orders (MoM) (AUG)	2.4%	-1.8%
MON	14:00	USD	Existing Home Sales (SEP)	4.30M	4.13M
MON	14:00	USD	Existing Home Sales (MoM) (SEP)	4.1%	7.6%
TUE	08:30	GBP	Gross Domestic Product (QoQ) (3Q A)	0.4%	1.2%
TUE	08:30	GBP	Gross Domestic Product (YoY) (3Q) A	2.4%	1.7%
TUE	13:00	USD	S&P/Case-Shiller Home Price Index (AUG)		148.91
TUE	13:00	USD	S&P/Case Shiller 20 City (MoM) SA (AUG)	-0.20%	-0.13%
TUE	13:00	USD	S&P/Case-Shiller Composite-20 (YoY) (AUG)	2.20%	3.18%
TUE	14:00	USD	Consumer Confidence (OCT)	49.5	48.5
TUE	21:00	USD	ABC Consumer Confidence (OCT 24)
TUE		EUR	German CPI (YoY) (OCT P)	1.3%	1.3%
TUE	00:30	AUD	Consumer Prices Index (YoY) (3Q)	2.9%	3.1%
WED	12:30	USD	Durable Goods Orders (SEP)	2.0%	-1.5%
WED	14:00	USD	New Home Sales (SEP)	300K	288K
WED	14:00	USD	New Home Sales (MoM) (SEP)	4.2%	0.0%
WED	20:00	NZD	RBNZ Rate Decision (OCT)	3.00%	3.00%
WED		JPY	Bank of Japan Rate Decision (OCT 28)	0.10%	0.10%
THU	04:00	CNY	Leading Index (SEP)		101.91
THU	07:55	EUR	German Unemployment Change (OCT)	-30K	-40K
THU	12:30	USD	Initial Jobless Claims (OCT 23)	455K	452K
THU	12:30	USD	Continuing Claims (OCT 16)	4430K	4441K
THU	21:45	NZD	Exports (New Zealand dollars) (SEP)		3.15B
THU	21:45	NZD	Imports (New Zealand dollars) (SEP)		3.59B
THU	23:15	JPY	Nomura/JMMA Manufacturing PPMI (OCT)		49.5
THU	23:30	JPY	National Consumer Price Index (YoY) (SEP)	-0.6%
THU	23:30	JPY	Jobless Rate (SEP)	5.1%	5.1%
THU	23:30	JPY	National CPI Ex Food, Energy (YoY) (SEP)	-1.5%
THU	23:50	JPY	Industrial Production (MoM) (SEP P)	-0.6%	-0.5%
THU	23:50	JPY	Industrial Production (YoY) (SEP P)	12.3%
THU		CNY	MNI Business Condition Survey (OCT)		69.54
FRI	09:00	EUR	Euro-Zone Unemployment Rate (SEP)	10.1%	10.1%
FRI	12:30	CAD	Gross Domestic Product (MoM) (AUG)	0.3%	-0.1%
FRI	12:30	USD	Gross Domestic Product (Annualized) (3Q A)	2.2%	1.7%
FRI	13:55	USD	U. of Michigan Confidence (OCT F)	68.0	67.9

As noted the key report this week is the US Q3 GDP figures, which will provide a timely insight into where the US economy is at - of course as always its not so much the quantum that matters as much as the breakdown. In other words where is the growth coming from? and what are the flow on effects? In any case the forecasts are for around 2-3%, and will likely slow in the 4th quarter. The UK is also on the GDP radar this week, with expectations for a slower 0.4% q/q rate (compared to 1.2% in Q2), and is likely to only slow further as the UK comes to grips with some of the key challenges it's currently facing.

On the monetary policy front there's the RBNZ in New Zealand, which is likely to hold at 3.00%, as the governor recently signaled rates would likely be on hold until next year (having tightened from 2.50% this year). The bank of Japan has already reached the limit in terms of interest rates, but could come out with further quantitative easing plans in efforts to stimulate the economy and get inflation going.

Speaking of Japan, there's the usual consumer price index data due this week (expected to show continued deep deflation), and employment data (little change expected), and industrial production (a slight decrease), and trade data (also expecting a slower rate of expansion). So combined with potential policy action from the Bank of Japan, the data will give a good insight into where the Japanese economy is headed. Oh and its neighbor has a leading index report out this week too.

Back to the US, the other key data this week is the ever critical housing report; S&P Case-Shiller home price indexes (as well as the existing and new home sales reports), so it will be good to check in on the US housing market. There's also the consumer confidence indexes due out (conference board, and University of Michigan). But of course waiting for positive changes in these data sets is currently like watching paint dry - but do search for insights in the details nonetheless.

So as always, have a great week, watch out for surprises, and stay tuned for updates...

Sources
DailyFX www.dailyfx.com/calendar
Forex Pros www.forexpros.com/economic-calendar/
Forex Factory www.forexfactory.com/calendar.php
Bloomberg www.bloomberg.com
+various statistics websites and central bank websites for verification

Article Source: http://www.econgrapher.com/25oct-calendar.html

Top 5 Economics Graphs of the Week - 18 September 2010

This week we look at some of the monetary policy decisions that were announced, then review the consumer spending stats in the US before checking in on inflation in the US as well as the UK. We wrap-up with a snapshot of the commodities market.

1. Monetary Policy Review
This week there were a few interest rate decisions out; the Reserve Bank of New Zealand held rates steady at 3.00% citing global growth as well as the earthquake impact. The Reserve Bank of India increased rates again; lifting the repo rate +25bps to 6.00% (and the reverse repo rate +50bps to 5.00%) as inflation concerns continued. The Swiss National Bank left the 3-month libor target rate unchanged at 0.25%, judging current levels to be appropriate. The Central Bank of the Republic of Turkey held its 1-week repo rate at 7.00% but cut the overnight borrowing rate -25bps to 6.25%. There was also the Bank of Japan of course, which intervened in the currency markets this week for the first time in 4 years, as the strong yen started to put pressure on the Japanese economy. So basically same story here as usually mentioned - a very de-synchronized approach to monetary policy across the globe at the moment as we carry on through the uneven recovery.

2. US Retail Sales
US retail sales beat expectations in August, rising 0.4% month on month vs consensus 0.3%, and more or less flat vs July's growth rate. Core retail sales grew 0.6% vs expected 0.4%, and previous 0.2%. The strong sectors were gasoline station sales, food & beverages, and clothing; while the weak sectors were health & personal care, sporting goods & hobby stores, general merchandise, and nonstore retailers. So the numbers are relatively positive - at this stage of the recovery a small positive or even just a plain positive is a win; but retail sales are still tracking well below trend.

3. US Inflation
US CPI came in flat year on year again, with headline inflation rising 1.2% year on year vs 1.3% in July, and core rising 1.0% - the same as July and June. Basically nothing to see here right now, this is the quiet part on the inflation front; the only real price pressure is coming from energy and food prices, but there is currently a baseline of demand that will probably stop the situation from falling into deflation. If any where the outlook is probably for a few more months of flatness, with a gradual increase.

4. UK Inflation
UK inflation rose 3.1% in August, placing it above the Bank of England's target 2.0% for the 8th consecutive month. The situation in the UK is a little different from the US one, there are a few one-offs in the CPI results still, but the outlook is for relatively persistent inflation around 3%. The Bank of England quarterly inflation outlook poll showed UK consumers expect prices to increase by 3.4% over the next 12 months, up from 3.3% in the May results, and the highest since August 2008. So the UK situation isn't terrific; relatively high inflation with relatively stagnant growth.

5. Commodities
Since we looked at some CPI stats in this edition, it would be rude not to look at where commodities are tracking. If there is any reason for inflation to be underpinned at least, this is it. The dichotomy of economic growth rates in the global economy between dynamic emerging markets and mature developed markets is having an interesting effect. China and other emerging markets still has a strong appetite for commodities as it invests in infrastructure, and continues manufacturing - for exports as well as meeting the growing domestic demand. This will ultimately be good for the global economy, but it will also drag up inflation rates around the world as commodity input prices feed their way through the value chain.

Summary

So we looked at some of the monetary policy decisions last week and saw what will be characteristic of the global economic recovery as it plays out over the next couple of years, i.e. de-synchronised monetary policy, as a result of an uneven recovery and resulting political pressures. We then looked briefly at retail sales in the US and saw that people are still spending, and reviewed inflation results from the US and UK and noted that although inflation is currently flat-lining in these developed economies, the outlook will be for at least a gradual increase. Indeed if you think about the dynamics in play in the commodities markets, the possibility of the strong emerging markets dragging up not only global growth, but global inflation starts to get interesting...

Sources:
1. Reserve Bank of New Zealand www.rbnz.govt.nz & Reserve Bank of India www.rbi.org.in & Swiss National Bank www.snb.ch & Central bank of the Republic of Turkey www.tcmb.gov.tr
2. US Census Bureau www.census.gov
3. US Bureau of Labor Statistics www.bls.gov
4. Trading Economics www.tradingeconomics.com
5. Thomson Reuters/Jefferies www.jefferies.com

Article Source: http://www.econgrapher.com/top5graphs18sep.html

RBNZ Holds OCR at 3.00%, Notes Earthquake Impact

The RBNZ (Reserve Bank of New Zealand) left the OCR (Official Cash Rate) unchanged at 3.00%, leaving banks' core overnight funding costs unchanged. The decision was expected by most, with most economists in New Zealand expecting the next move not to come until as late as December this year.

The RBNZ also released its detailed economic analysis report; the Monetary Policy Statement, where it outlined its views on the New Zealand economy and rationale for the decision. The Bank noted that (as with the expectations of those in the market) further tightening of monetary policy is likely to be more drawn out:

“Over time, it is likely that further removal of monetary policy support will be required. The pace and extent of further OCR increases is likely to be more moderate than was projected in the June Statement.”

The New Zealand Economy
In its assessment of the New Zealand economy the RBNZ noted the likely impact of the Christchurch earthquake (see below for more details), but it also honed in on the slowing of the pace of the global economic recovery; in particular in the US. But pointed out that New Zealand's key trading partners; China and Australia are both growing strong and will likely support demand for exports.

However the RBNZ did note the decline in the outlook for the household sector as deleveraging runs its course; thus resulting in a relatively subdued housing market and lackluster consumer spending. On the inflation front, unsurprisingly the RBNZ did not see significant underlying inflationary pressure, but did note the likelihood of a spike in short-term inflation.

“Overall, despite the weakened outlook, we still expect that growth will progressively absorb current surplus capacity over the next few years. In addition, changes to indirect taxes and earthquake impacts will cause headline inflation to spike higher over the coming year. Previous experience of GST increases, the fact that annual CPI inflation has been near 2 percent for the past year and a half, and the subdued state of domestic demand suggest this inflation spike will have little impact on medium-term inflation expectations."

Earthquake Impact
The RBNZ noted the potential economic impact of the 4th of September earthquake (7.1 magnitude). The earthquake significantly damaged buildings and infrastructure, and thus will have a short term negative impact on the economy; but over the medium term it is expected that there will be a net benefit to the economy with insurance payouts and reconstruction stimulating the faltering building and construction sector.

“The earthquake that struck Canterbury on 4 September has significantly disrupted economic activity and is likely to continue to do so for some time yet. Many homes and businesses have been damaged, as have significant parts of Canterbury’s public infrastructure. Eventual reconstruction and repairs will require considerable resources over the next year or two, particularly in the construction sector. If, in the aftermath of the earthquake, the prices of some goods and services increase temporarily, monetary policy would remain focused on the medium-term trend in inflation. The Policy Targets Agreement explicitly instructs the Bank to look through temporary price increases generated by a natural disaster."

Summary
Overall the RBNZ confirmed my previous suspicion that tightening would be on the go-slow for the rest of the year with perhaps only one more 25bp increase. As far as the New Zealand economy is concerned, the recovery is still relatively well entrenched, but GDP growth is likely to come in slower in the second half of 2010. There may well be a few quarters of slower growth, but 2011 promises to bring stronger growth as the economy rebounds driven by exports, earthquake rebuilding in Canterbury, and the 2011 Rugby World Cup.

In terms of gaining exposure to the New Zealand economy, you can play the volatile NZD exchange rate, or invest in one of the New Zealand ETFs e.g. iShares MSCI New Zealand Invest (ENZL), Wisdom Tree Dreyfus New Zealand Dollar (BNZ), or through one of the ETFs listed on the New Zealand Stock Exchange (NZX.nz) such as the top 50 stocks fund (FNZ.nz); or of course directly into stocks listed on the NZX or dual listed on the ASX.

Sources
Econ Grapher Analytics www.econgrapher.com
Reserve Bank of New Zealand www.rbnz.govt.nz
Statistics New Zealand www.stats.govt.nz

Article Source: http://www.econgrapher.com/16sep-rbnz.html

Top 5 Economics Graphs of the Week - 31 July 2010

This week we look at the GDP numbers for Q2 from the US and South Korea. Then we look at the US consumer confidence and Case Shiller housing market data, and finish up with a look at inflation and unemployment in Japan, and New Zealand monetary policy.

1. US GDP
The US economy grew 2.4% SAAR in the second quarter (0.6% in normal terms), slightly below consensus 2.5%, and slower than the revised 3.7% in Q1. On an annual basis GDP is up 3.2% vs 2.4% in Q1. The main drivers of growth were residential investment, investment in equipment & software, and inventories; the main detractor was (surprise, surprise) a shrinking of net exports. So overall not a bad result, but probably as good as it gets for now, especially given where much of the US data points are at, there are several indicators (as well as underlying fundamentals e.g. weak housing market) that will make the second half a lot harder. So rumors about the potential for more easing both on the fiscal and monetary policy fronts may end up validated in the second half of this year... watch this space.

2. South Korea GDP
The South Korean economy grew 1.5% in the second quarter, slower than the 2.1% recorded in Q1, but above consensus of 1.1%. On an annual basis GDP was up 7.2%, off slightly from 8.1% in Q1, but also above consensus 6.6%. The expansion was driven by strong export-led manufacturing activity and facility investment, but the construction sector was a detractor (driven by a sluggish domestic real estate market). The continued expansion will likely spur the Bank of Korea to raise interest rates again (having increased 25bps to 2.25% early this month). But like all trade driven economies, the Republic of Korea will be closely exposed to the fortunes of the global economy in the second half.

3. US Housing market and Consumer Confidence
US consumer confidence fell again in July to 50.4 vs consensus 51.0 and previous 52.9. The drop was led by a fall in the expectations component. On the housing front, the May reading of the S&P Case-Shiller 20-city home price index showed a 3.9% rise year on year (vs 4.1% in April), and a 0.5% monthly gain (vs 0.6% in April). The residual impact of the tax credits continued to underpin house prices. But going into the second half of 2010, the theme of 'this is as good as it gets' will likely ring true in the housing market space also. The fundamentals point to sideways movement at best, and a fall at worst. Unemployment is still high, debt levels compared to house prices are still too high, consumers are still hurting, and interest rates are probably - if anything - going to rise, so this bit remains a key vulnerability for the US economic recovery.

4. Japan unemployment and deflation
Japan saw a slight easing of deflation on a headline CPI basis, with the annual rate at -0.7% in June vs -0.9% in May, on a core basis the rate also reduced slightly to -1.0% vs -1.2% in May and consensus for -1.1%. So on the deflation front there has been cause for at least a bit of hope with recent trends. On the unemployment side though, the jobless rate rose to 5.3% from 5.2% in May, but there were some positives in the data with payrolls rising 40k in June, vs a fall of -240k in May. The job offer to job seeker ration rose slightly to 0.52 in June from 0.50 in May. So signs are tentatively that inflation and employment are gradually starting to catch up with the trade-driven rebound of economic activity in Japan, but the serious deflation and government debt problems still remain, as do the global vulnerabilities.

5. New Zealand monetary policy
The RBNZ (Reserve Bank of New Zealand) increased the official cash rate at its July meeting 25bps to 3.00%, and signaled that further rate rises will likely be on the go-slow. The bank noted that policy normalization may be more moderate going forward, but of course with the caveat of monitoring the economic environment and financial market developments. The New Zealand economy is in recovery mode and is growing, but is still dealing with the damage from the global financial crisis and the deep recession; as well as a spate of finance company collapses, beginning prior to the crisis and still continuing (the banking system remains firmly intact though, as none of the finance companies were particularly systemically important - but a lot of investors got burned). So, in spite of a projected short term (mainly artificial) spike in inflation, the outlook is for a few more interest rate rises this year, as appropriate.

Summary

So we've got the US economy showing another quarter of growth, but a little slower, and the potential to slow even further in the second half. There's also the key vulnerability of the US housing market, and the lingering damage of the crisis on the US consumer.

In Korea, the economy is still going strong, albeit a little slower, and this is likely to result in a couple more interest rate rises. But the Korean economic recovery has been driven exports, thus the recovery remains exposed to trends in international trade. Likewise Japan is starting to see improvements in its employment and deflation situation as the economy recovers with the help of rising trade.

In New Zealand the same theme of global vulnerabilities shows through, but for the most part on the domestic front the recovery is reasonably in tact and both GDP, inflation and monetary policy look fairly predictable in the second half of this year - holding all else constant.

Sources
1. US Bureau of Economic Analysis www.bea.gov
2. OECD Statistics stats.oecd.org/index.aspx
3. Standard & Poors www.standardandpoors.com & Conference Board www.conference-board.org
4. Trading Economics www.tradingeconomics.com
5. Reserve Bank of New Zealand www.rbnz.govt.nz

Article Source: http://www.econgrapher.com/top5graphs31jul.html

RBNZ raises OCR to 3.00%, signals go-slow

The RBNZ (Reserve Bank of New Zealand) increased the official cash rate at its July meeting 25bps to 3.00%, and signaled that further rate rises will likely be on the go-slow. It noted that policy normalization may be more moderate going forward, but of course with the caveat of monitoring the economic environment and financial market developments:

"Given this, some further removal of monetary policy stimulus is appropriate at this stage. Even after today’s move, the level of the OCR is still very supportive of economic activity. The pace and extent of further OCR increases is likely to be more moderate than was projected in the June Statement. Our policy assessment will be continually reviewed in light of economic and financial market developments."

Indeed, this is probably the correct approach as the policy rate is still well below average, and is certainly in the stimulus zone, but against a backdrop of still subdued economic activity (recovery yes, but below trend, yes too). The New Zealand economy is in recovery mode and is growing, but is still dealing with the damage from the global financial crisis and the deep recession; as well as a spate of finance company collapses, beginning prior to the crisis and still continuing (the banking system remains firmly intact though, as none of the finance companies were particularly systemically important - but a lot of investors got burned).

"In New Zealand, domestic demand is subdued. Households are cautious, with retail spending growing only modestly, housing turnover in decline and household credit growth weak. While this caution has been evident for some time, the recent slowing in net immigration will act to further dampen consumer spending. Business investment remains very low, with corporate lending continuing to be subdued."

On the inflation front though, the headline inflation rate is widely expected to temporarily spike above 3% as government related price changes e.g. GST come into force. However the RBNZ does not expect this to translated through into core inflation, but there is the risk that firms and households raise their inflation expectations as a result, and that could lead to more genuine inflation. So the outlook seems fairly predictable for New Zealand, the main wild-cards come from abroad, both upside and downside.

Sources
Econ Grapher Analytics www.econgrapher.com
Statistics New Zealand www.stats.govt.nz
Reserve Bank of New Zealand www.rbnz.govt.nz

Article Source: http://www.econgrapher.com/29jul-rbnz.html

Economic Calendar - 26 July 2010

Here's the Economic Calendar for the week commencing the 26th of July 2010. This week the main event is Q2 GDP for the US, there's also the monthly GDP figure from Canada. The US also has the S&P Case-Shiller house price index, and consumer confidence. Elsewhere there's the RBNZ in New Zealand, which is expected to hike rates again. There's also a lot of key data out of Japan such as the jobless rate, retail sales, and industrial production; the Euro Zone also releases CPI and unemployment data.

(More commentary follows the table)

Day	Time (GMT)	Code	Event/Release	Forecast	Previous
MON	1:30	AUD	Producer Price Index (YoY) (2Q)	1.5%	-0.1%
MON	12:30	USD	Chicago Fed National Activity Index (JUN)		0.21
MON	14:00	USD	New Home Sales (MoM) (JUN)	6.7%	-32.7%
MON	14:00	USD	New Home Sales (JUN)	320K	300K
TUE	8:00	EUR	Euro-Zone M3 s.a. (YoY) (JUN)	-0.1%	-0.2%
TUE	13:00	USD	S&P/Case-Shiller Composite-20 (YoY) (MAY)	3.75%	3.81%
TUE	13:00	USD	S&P/Case-Shiller Home Price Index (MAY)		144.56
TUE	14:00	USD	Consumer Confidence (JUL)	51.8	52.9
WED		EUR	German Consumer Price Index (YoY) (JUL P)	1.2%	0.9%
WED	1:30	AUD	Consumer Prices Index (QoQ) (2Q)	1.0%	0.9%
WED	1:30	AUD	Consumer Prices Index (YoY) (2Q)	3.4%	2.9%
WED	3:00	NZD	NBNZ Business Confidence (JUL)		40.2
WED	3:00	NZD	NBNZ Activity Outlook (JUL)		38.5
WED	8:00	EUR	ECB Publishes Bank Lending Survey
WED	12:30	USD	Durable Goods Orders (JUN)	0.8%	-1.1%
WED	12:30	USD	Durables Ex Transportation (JUN)	0.5%	0.9%
WED	18:00	USD	Fed Publishes Beige Book Economic Report
WED	21:00	NZD	Reserve Bank of New Zealand Interest Rate Decision	3.00%	2.75%
WED	22:45	NZD	Trade Balance (New Zealand dollars) (JUN)	368M	814M
WED	23:50	JPY	Retail Trade s.a. (MoM) (JUN)	0.4%	-2.0%
WED	23:50	JPY	Retail Trade (YoY) (JUN)	3.2%	2.8%
THU	1:00	AUD	HIA New Home Sales (MoM) (JUN)		-6.4%
THU	7:55	EUR	German Unemployment Rate s.a. (JUL)	7.6%	7.7%
THU	9:00	EUR	Euro-Zone Economic Confidence (JUL)	99.0	98.7
THU	9:00	EUR	Euro-Zone Business Climate Indicator (JUL)	0.39	0.37
THU	23:01	GBP	GfK Consumer Confidence Survey (JUL)	-21	-19
THU	23:30	JPY	Jobless Rate (JUN)	5.2%	5.2%
THU	23:30	JPY	Household Spending (YoY) (JUN)	-0.8%	-0.7%
THU	23:30	JPY	National Consumer Price Index (YoY) (JUN)	-0.7%	-0.9%
THU	23:50	JPY	Industrial Production (YoY) (JUN P)	18.9%	20.4%
FRI	5:00	JPY	Housing Starts (YoY) (JUN)	1.8%	-4.6%
FRI	5:00	JPY	Annualized Housing Starts (JUN)	0.759M	0.737M
FRI	9:00	EUR	Euro-Zone CPI Estimate (YoY) (JUL)	1.8%	1.4%
FRI	9:00	EUR	Euro-Zone Unemployment Rate (JUN)	10.0%	10.0%
FRI	12:30	CAD	Gross Domestic Product (MoM) (MAY)	0.1%	0.0%
FRI	12:30	USD	Gross Domestic Product (Annualized) (2Q A)	2.5%	2.7%
FRI	12:30	USD	Personal Consumption (2Q A)	2.3%	3.0%
FRI	12:30	USD	Employment Cost Index (2Q)	0.5%	0.6%
FRI	13:45	USD	Chicago Purchasing Manager (JUL)	56.0	59.1
FRI	13:55	USD	U. of Michigan Confidence (JUL F)	67.5	66.5
FRI	20:15	USD	Bloomberg Financial Conditions Index (APR) (JUL)		-1
SAT	22:00	CNY	Manufacturing PMI		52.1

Starting with the main event, the US economy is expected to show an annualised growth rate of 2.5% in the second quarter of 2010, which will be slightly lower than the previous 2.7%. As I've often pointed to, it's likely that the first half of 2010 will be as good as it gets for this year, with either slower or downright double-dip material showing up in the second half.

On the inflation front, we've got several countries reporting CPI figures; first up is Australia, which is expected to show an annual inflation rate of 3.4% for the second quarter (up from 2.9% in Q1). Japan is expected to show further deflation with -0.7% year on year (vs -0.9% in May). The EU is also expected to show a slight pick up, to 1.8% from 1.4%.

There's also several confidence indicator updates, there's the US with the conference board consumer confidence index; expected to slip further to 51.8 from 52.9, and at the end of the week there's also the University of Michigan consumer sentiment index which is expected to rise slightly to 67.5 from 66.5. There's also National Bank of New Zealand business confidence, EU economic confidence, and China PMI.

It's also generally a heavy data week for Japan and the US. The US has the Fed's Beige Book economic report out, and the updates on the US housing market continue with S&P Case Shiller home price index (along with new home sales the day before), durable goods orders, and personal consumption stats, so it will provide a good insight into where the US is tracking.

In Japan there's retail sales, the jobless rate, CPI, industrial production, and housing starts - so it will also be good to get an update on where the world's 3rd or 2nd (depending how you measure) largest economy.

So as always, have a great week, watch out for surprises, and stay tuned for updates...

Sources
DailyFX www.dailyfx.com/calendar
Forex Pros www.forexpros.com/economic-calendar/
Forex Factory www.forexfactory.com/calendar.php
Bloomberg www.bloomberg.com
+various statistics websites and central bank websites for verification

Article Source: http://www.econgrapher.com/26jul-calendar.html

Monetary Policy Wrap-up 11 June 2010

In the past 48 hours we saw monetary policy decisions from New Zealand, Brazil, Europe, and UK. The New Zealand rate hike was as expected, the Brazilian one was too (though most probably didn't know it), the ECB and BoE non-decisions were also as expected. Following is a run down on each of the decisions and the current drivers of monetary policy in these four economies.


The chart above shows the path of the key policy rates for all of the central banks in question. The direction and magnitude of rates over the past couple of years should be no surprise to most, but this sets the scene for the following commentary.

Reserve Bank of New Zealand - increased 25bps to 2.75%
First up is the RBNZ, which raised the official cash rate to 2.75% from 2.50%, a move that was expected by most, and more or less flagged by the RBNZ in its previous monetary policy announcement. The RBNZ noted that the New Zealand economy is likely to expand 3.5% in the next two years on the back of export prices and volume growth, an improving labour market and a pick-up in residential and business investment.

The bank also noted that underlying CPI inflation is likely to track within its target range, even though headline inflation will be boosted by one-offs like the GST rate increase. The bank noted a possibility for a lower neutral policy rate in its announcement too:

“The fact that bank funding costs are higher, long-term interest rates are higher than short-term interest rates, and a greater proportion of borrowers use floating rate mortgages should all reduce the extent to which the OCR will need to be increased relative to previous cycles.”

Banco Central do Brazil - increased 75bps to 10.25%
The Brazilian central bank added another meaty chunk to the Selic rate, lifting it 75bps to 10.25% (having lifted it another 75bps from 8.75% not long ago. This comes just a day after Brazil announced its economy grew 9% year on year in the first quarter this year (albeit off a low base comparator period). Thus the main driver of the recent monetary policy decisions by the Banco Central do Brazil are about tackling potential overheating. Here's the English announcement from the Banco:

"Continuing the adjustment process of the monetary conditions to the forward-looking scenario of the economy, in order to ensure the convergence of inflation to the targets path, the Copom unanimously decided to increase the Selic target to 10.25 percent, without bias."

European Central Bank - no change at 1.00%
The ECB left its main interest rate unchanged at 1%, and this probably wont change in the near term. The Eurozone is currently to caught up with sovereign debt crises and contagion risks to worry about inflation in the near term, indeed - if anything the next move could even be down as a last ditch effort if things went even more downhill. But even if things stabilise the recovery in the EU is going to be very gradual, fragile, and uneven - as previously noted in past analysis. The ECB announcement is always very thorough, the key paragraph is:

"Based on its regular economic and monetary analyses, the Governing Council decided to leave the key ECB interest rates unchanged. The current rates remain appropriate. Taking into account all the new information which has become available since our meeting on 6 May 2010, we continue to expect price developments to remain moderate over the policy-relevant medium-term horizon. Global inflationary pressures may persist, while domestic price pressures are expected to remain low. The latest information has also confirmed that the economic recovery in the euro area continued in the first half of 2010, but quarterly growth rates are likely to be rather uneven.

Looking ahead, we expect the euro area economy to grow at a moderate pace, in an environment of continued tensions in some financial market segments and of unusually high uncertainty. Our monetary analysis confirms that inflationary pressures over the medium term remain contained, as suggested by weak money and credit growth. Overall, we expect price stability to be maintained over the medium term, thereby supporting the purchasing power of euro area households. Inflation expectations remain firmly anchored in line with our aim of keeping inflation rates below, but close to, 2% over the medium term. The firm anchoring of inflation expectations remains of the essence."

Bank of England - no change at 0.50%
The Bank of England left the key policy rate at 0.50% and made no adjustments to the asset purchase program, leaving the limit at GBP 200 billion. The BoE is unlikely to do anything in the near term (similar to the ECB) as the UK economy muddles along out of recession. In fact fiscal policy tightening in both the UK and Europe may end up capping inflation pressures somewhat in the near term. The characteristically brief announcement was:

"The Bank of England’s Monetary Policy Committee today voted to maintain the official Bank Rate paid on commercial bank reserves at 0.5%. The Committee also voted to maintain the stock of asset purchases financed by the issuance of central bank reserves at £200 billion."

That's all for now. The main theme is that monetary policy stimulus withdrawal continues to be uneven, with different paces matching different prospects, and rightfully so as the global economy looks more and more uneven.

Sources
Econ Grapher Analytics www.econgrapher.com
Reserve Bank of New Zealand www.rbnz.govt.nz
Banco Central do Brazil www.bcb.gov.br
European Central Bank www.ecb.int
Bank of England www.bankofengland.co.uk

Article Source: http://www.econgrapher.com/11june-monetarypolicy.html