Sponsor Forex Brokers Wednesday's News Recap: Canadian Inflation Soars in June, Beige Book Downbeat

News Recap | Written by CEP News | Jul 23 08 21:03 GMT |
(CEP News) - The key news events of the day included a higher-than-expected June CPI inflation reading in Canada, a significant drop in crude oil supplies in the U.S., and a Beige Book report that said eight of the 12 districts were in weaker shape than six weeks ago.

Canada's headline inflation rate jumped 3.1% in June, largely the result of rising fuel prices, according to data released Wednesday by Statistics Canada. The core Consumer Price Index, which leaves out volatile items like energy, mortgages and fresh fruit and vegetables, rose 1.5% in June. The consensus estimate beforehand was for a 2.9% increase in the overall rate and a rise of 1.6% in core.

"On balance, this provides the Bank of Canada ammunition for continuing to keep rates steady," noted Charmaine Buskas, senior economics strategist from TD Securities. "It does not necessarily mean the bank needs to hike as it recently projected that total CPI will peak at 4.1% Y/Y by the fourth quarter when it released its Monetary Policy Report update last week. That said, the inflation trends are looking pretty hot in Canada, by any metric and suggest that the Bank will keep a close watch on what commodity prices as well as other prices do in the coming quarters."

In the U.S., crude oil inventories declined further than expected in the week ending July 18, falling by 1.558 million barrels compared to the previous week's surprise 2.952 million barrel gain. Economists had been expecting a draw of 675k barrels. Gasoline inventories advanced by 2.847 million compared to forecasts for a 200k barrel increase. Meanwhile, distillate inventories advanced by 2.419 million barrels, more or less in line with forecasts for a build of 2.5 million barrels. The DOE also reported a 2.35% decrease in refinery utilization despite forecasts for no change.

The Federal Reserve's Beige Book report, an anecdotal summary of regional conditions in the 12 U.S. districts, reported that two-thirds of all districts were weaker than six weeks ago, while two were steady or stable and two others marginally improved.

Price pressures were elevated across the country and credit conditions were tight, the Beige Book said. On the plus side, wage pressures were generally limited in most areas, and retail inventories were reported as "largely satisfactory."

Treasury Secretary Henry Paulson said today that an agreement reached Tuesday on a housing rescue bill will send a strong message to investors and help the U.S. turn the corner on the housing crisis. While Paulson said the bill included some "wasteful" measures, such as a $3.9 billion measure to provide help for homeowners facing foreclosure, he urged President George W. Bush to drop his veto threat.

Inflation-hawk Charles Plosser, President of the Philadelphia Fed, spoke on Bloomberg Television and said the Fed may have to hike rates even as housing prices continue to fall. He said price pressures are moving through the economy and the Fed may have no choice but to take action.

U.S. weekly mortgage applications in the United States declined in the week ending July 18, according to data released from the Mortgage Bankers' Association (MBA) on Wednesday, which reported a 6.2% week-over-week fall in applications. In the previous week, applications rose by 1.7%. The portion of fixed-rate mortgages fell 5.6%, after accelerating 2.7% previously, while those opting for variable rates fell by 12.5% after the previous week's 7.2% decrease.

In overnight news, the Bank of England released the minutes of its July 9 and 10 Monetary Policy Committee meeting and reported that seven members of the MPC voted to keep the Bank Rate unchanged at 5.0%, while two members voted for a change in the rate.

The seven members who voted for a hold were Mervyn King, Charles Bean, John Gieve, Kate Barker, Spencer Dale, Andrew Sentance and Paul Tucker, while Tim Besley preferred a 25bp increase and David Blanchflower voted in favour of a quarter-point reduction.

UK mortgage approvals for June, as measured by the British Bankers' Association (BBA), fell to a new record low of 21,118 from the previous month's 27,499 level. The number of approved loans for house purchases in May had been revised down from a previous reading of 27,968.

In an interview with Austrian newspaper Wiener Zeitung on Wednesday, European Central Bank Governing Council member Klaus Liebscher reiterated that the ECB's primary commitment was to price stability and that the citizens of the euro area would not tolerate a loose monetary policy.

The Australian Bureau of Statistics (ABS) announced that Australia's All Groups CPI rose 1.5% in the June quarter 2008, compared with a 1.3% rise in the March quarter, resulting in a total rise of 4.5% through the year to the June quarter 2008. The consensus had been for a 1.3% increase in quarterly CPI and a 4.3% increase in annual inflation.

The Reserve Bank of Australia's trimmed mean CPI advanced 1.2% in the quarter, compared to forecasts for a 1.1% increase and matching the previous quarter's reading, while the annual trimmed mean reached 4.3%, also above the projected 4.2% gain and previous 4.0% rise.

The RBA's weighted mean CPI advanced 1.0% in the quarter compared to forecasts for a 1.1% increase and below the previous quarter's 1.3% gain, while the annual trimmed mean reached 4.4%, above the projected 4.3% gain and previous 4.4% rise.

By Stephen Huebl, shuebl@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it , with contributions from Erik Kevin Franco, efranco@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it , Todd Wailoo, twailoo@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it , Patrick McGee, pmcgee@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it , and Geoff Matthews, gmatthews@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it , edited by Cristina Markham, cmarkham@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it

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