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Situation

• On a monthly basis prices rose by 0.65 % (0.91 % in Mar’07)
• On an annual basis prices rose by  2.57 % p.a ( 2.78% p.a in Mar’07)

Core inflation stands at 2.30% p.a ( was 2.50% in Mar’07)

Back ground

• Core CPI has dropped. (click on image for a larger visual )
• Producer prices rose in Mar’07 ( impact tends to be post May’07 on CPI)
• As on May 16 ‘07 crude is averaging at 62.59 for the month. ( 2.2% less than Apr’07) 

Conclusion

Inflation looks like it it will range between 3 % p.a - 1.3% p.a
till mid’07 ( a rise is more possible than falls)

The Fed under these circumstances may not consider a drop in interest rates for their rate meeting due on June 27th

Related Links

• USA - Fed meeting : No change in interest rate ( Fed remains open to hiking rates)

• USA - Inflation (CPI) inches up in Mar’07 , while core inflation drops
• UK Inflation (CPI) drops in Apr’07
• Euro area - Inflation (CPI) flat in Mar’07
• Japan - Inflation indices ( CPI ) deflate in Mar’07 - Bank rates likely to remain unchanged
• India - marginal drop in inflation ( CPI )

• USA - Producer prices continue to grow in Mar’07
• UK - PPI Producer prices drop in Apr’07  
• Japan - Producer prices ( PPI ) inches up in Mar’07
• Europe - Producer Prices : Prices in Mar’07 rise at the lowest pace since Jul’04

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Situation

On a monthly basis prices rose by 0.29 % (0.48 % in Mar’07)

On an annual basis prices rose by  2.75 % p.a ( 3.07% p.a in Feb’07)

Background (click on image for a bigger visual)

• The Bank of England ( BOE) voted to raise the official Bank Rate paid on commercial bank reserves by 0.25 percentage points to 5.5% during their May meeting.
• The Bank of England’s inflation target is 2%. This is expressed in terms of an annual rate of inflation based on the Consumer Prices Index (CPI).
• Inflation growth was at a record high in Mar’07

Conclusion (click on image for a bigger visual)

1. Inflation can be expected to drop to 2.50% p.a towards mid’07  
2. The BOE’s aggressive posture to keep inflation towards the 2.00% range should reign the inflation to the sub 2.00% zone towards end 2007 

Related Links

• UK - Bank Rate hiked as expected

• UK - Inflation ( CPI) at its highest since Sept’92
• USA - Inflation (CPI) inches up in Mar’07 , while core inflation drops
• Euro area - Inflation (CPI) flat in Mar’07
• Japan - Inflation indices ( CPI ) deflate in Mar’07 - Bank rates likely to remain unchanged
• India - marginal drop in inflation ( CPI )

• UK - PPI Producer prices drop in Apr’07
• USA - Producer prices continue to grow in Mar’07
• Japan - Producer prices ( PPI ) inches up in Mar’07
• Europe - Producer Prices : Prices in Mar’07 rise at the lowest pace since Jul’04

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Situation

• On a monthly basis prices rose by 0.50 % (0.60 % in Mar’07)
• On an annual basis prices rose by  2.47 % p.a ( 2.68% p.a in Feb’07)

Background (click on image for a bigger visual)

• The Bank of England ( BOE) voted to raise the official Bank Ratee paid on commercial bank reserves by 0.25 percentage points to 5.5% during their May meeting.
• The Bank of Englands inflation target is 2%. This is expressed in terms of an annual rate of inflation based on the Consumer Prices Index (CPI).
• Producer prices had risen sharply in Mar’07.
• The hike in rates may have begun to hurt production growth ( and could hurt it further from Jun’07)

Conclusion  (click on image for a bigger visual)

1. Prices look like ranging towards 2.00% p.a upto a maximum of 2.9% p.a till mid ‘07. 
2. The BOE’s aggresive posture should reult in prices dropping below 2.00% to 0.50%  towards mid 2008

Related links

• UK - Bank Rate hiked as expected

• UK - Producer prices ( PPI) have a sharp rise in Mar’07
• USA - Producer prices continue to grow in Mar’07
• Japan - Producer prices ( PPI ) inches up in Mar’07
• Europe - Producer Prices : Prices in Mar’07 rise at the lowest pace since Jul’04

• UK - Inflation ( CPI) at its highest since Sept’92
• USA - Inflation (CPI) inches up in Mar’07 , while core inflation drops
• Euro area - Inflation (CPI) flat in Mar’07
• Japan - Inflation indices ( CPI ) deflate in Mar’07 - Bank rates likely to remain unchanged
• India - marginal drop in inflation ( CPI )

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The online edition of the Wall Street Journal reports

Two of the world’s best-known interest-rate experts, the “Maestro” and “The Bond King,” are now playing for the same team.

Alan Greenspan, returning to his roots as an economic consultant, has signed up Allianz AG’s Pacific Investment Management Co. as his first client since leaving as chairman of the U.S. Federal Reserve. Pimco’s chief investment officer is the widely followed bond king Bill Gross.

Among the predictions Mr. Greenspan has made for his new client: World interest rates are headed higher in the next few years.

Under the arrangement, signed this week, Mr. Greenspan will participate once each quarter in …

The full story is here (Subscription required).

Link via email from S Vaidyanathan

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