US inflation may stall rate cuts US consumer prices rose by 0.4% in January, official figures show, more than many analysts had forecast. According to the US Labor Department, the main drivers of the price growth were food and energy costs. The figures come as the US Federal Reserve has been slashing interest rates in an effort to kick-start slowing economic growth. Consumer Prices Rise Again in January Consumer Prices Post Another Big Gain in January As Food and Health Care Costs Jump WASHINGTON (AP) -- Consumer prices rose by a bigger-than-expected amount in January, reflecting big increases in the cost of food and health care, the government reported Wednesday. The Labor Department said that its closely watched Consumer Price Index posted a gain of 0.4 percent last month, matching the December increase and was higher than economists had expected. Core inflation, which excludes food and energy, showed an increase of 0.3 percent, the biggest jump in this measure in seven months. The cost of clothing, education, lodging and tobacco also moved higher.
China's inflation hits 11-year high Food shortages cause prices to jump, analysts warn bigger increases to come. China's inflation rose to its highest level in more than 11 years in January after devastating snowstorms worsened food shortages, according to data reported Tuesday, and analysts warned there might be sharper increases to come. Consumer prices in January climbed 7.1% from the same month last year, driven by an 18.2% rise in costs, the National Bureau of Statistics reported. Economists warned that despite efforts to ease food shortages, China faces pressure for prices to rise across the board due to higher wages and costs for coal, iron ore and other industrial materials. February inflation "is likely to be much higher than 7%, and might even get close to double-digit levels," said Goldman Sachs economists Yu Song and Hong Liang in a report to clients. "Inflation is likely to have further legs to run."
More Bank Losses to Come Just in case you thought the loan losses were over and we would be back to normal by summer, it looks like there are more loans losses to come from areas outside of mortgages. When a bank's problem is loan losses, dropping interest rates really is not going to help much. Lower rates makes it cheaper for banks to borrow, but the loan losses will cause the banks to restrict lending no matter how favorable the rates. Looks like this credit crunch could last a while. Wall Street banks are bracing for another wave of multibillion-dollar losses as the crisis that began with subprime mortgages spreads through the credit markets.
The next bubble is about to crash We just can't keep away from those asset bubbles. Now it is treasuries.... U.S. government bonds and emerging market equities have benefited as investors have sought refuge from the housing and credit crises, but the surge in popularity of the two asset classes is inflating a dangerous bubble that is likely to burst.
Platinum Still Climbing, Hits 14th Straight High Platinum set a lifetime high for the 14th straight day on Tuesday on strong speculative buying on the back of severe output problems in top producer South Africa. Other precious metals also advanced, with palladium hitting a 6-1/2-year high, gold rising more than 1.5 percent to trade near a record high and silver gaining nearly 2 percent. Bernanke's Rate Cuts Force Asia Back to Price Limits, Subsidies Ben S. Bernanke, the champion of free markets, is driving Asia's governments back to controlled economies. Under Bernanke's chairmanship, the Federal Reserve's steepest interest-rate cuts since 1990 are limiting his Asian counterparts' options to curb inflation. Instead of raising their own borrowing costs or letting their currencies appreciate faster, governments are resorting to regulating meat and egg prices in China, stockpiling cooking oil in Malaysia and subsidizing utility bills in Indonesia and the Philippines.
Fed's Lower Rates Pressure China to Strengthen Yuan Like it or not, China has no choice other than to let the yuan appreciate against the dollar. The combination of the world's fastest economic growth, the highest inflation rate in 11 years and the rising cost of intervention will force gains in the yuan to accelerate, even as policy makers in Beijing resist calls from the West to let the currency appreciate at a faster pace, say Pacific Investment Management Co. and Pictet & Cie., Switzerland's largest closely held private bank.
Stocks Slide After Weak Economic Reports Stocks Decline As Investors Grow Uneasy About Rising Consumer Prices, Weak Housing Figures NEW YORK (AP) -- Stocks fell Wednesday after a rise in consumer prices and lackluster readings on home construction touched off further concerns about the health of the economy. The uptick in consumer prices following a record finish for oil Tuesday stirred concerns that the Federal Reserve will have less room to lower interest rates in the coming months. Lowering rates can increase inflationary pressures. Investors are hoping for some insights on the Fed's thinking with the expected release Wednesday afternoon of minutes from the last meeting of the central bank's rate-setting committee.
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