Interest Rate Roundup

Wednesday, September 13, 2006

Overseas inflation and more thoughts on oil

Here are a couple of excerpts from Bloomberg on U.K. inflation in August (my emphasis added in bold) ...

"Consumer prices rose 2.5 percent from a year earlier, holding above the Bank of England's 2 percent target for a fourth month, the Office for National Statistics in London said today. That matched June's level, the highest since the index began in 1997, and exceeded the 2.4 percent median estimate in a Bloomberg survey of 33 economists. Prices rose 0.4 percent from July."

"Price increases in recreation and culture, clothing and footwear, furniture and household repair drove the index higher in August, the statistics office said. Those gains offset a downward effect from international airfares and transport, affected by a lower increase than last year in petrol.
Core inflation, excluding food, alcoholic beverages, tobacco and energy, quickened to 1.1 percent from 0.9 percent in July."

Now, here's what happened in China, according to AFP ...

BEIJING (AFP) - China's consumer inflation picked up pace in August, rising 1.3 percent from a year earlier as services became more expensive.

The data, marking a rise from one percent inflation in July, were announced as policy makers were still weighing the pros and cons of further tightening measures, but this figure was unlikely to force them to act, analysts said Monday.

Inflation figures in France, Germany and Spain also remained elevated, though not out of line with market expectations. The Big Kahuna -- the U.S. Consumer Price Index -- will be released on Friday.

Going forward, a major question for bonds is whether the decline in oil prices will keep overall inflation pressures contained. OR, will it help support the consumer-driven economy and keep wage and job growth stronger than it would otherwise be. The risks seem tilted toward lower bond prices and higher interest rates, from where I sit. We'll see...


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