Weekly preview

Central Bank - BoJ, BoE & ECB

April 09, 2008

Date / GMT		ACM	Consensus	Current Rate
9th / 2.00	BoJ Interest Rate Announcement	0.50%	0.50%	0.50%

	With the market still focused on the appointment of the new BoJ governor and deputy governor monetary policy has taken a back seat to politics. Given the current environment, our expectations for the BoJ to provide direction at this meeting is limited. We are in line with market consensus and expect officials to hold rates at 0.50%. Recent Tankan survey came in below market consensus (four-year low) as impact of higher commodity prices and slowing global demand specifically in the US is beginning to take its toll on the Japanese economy. Markets are still pricing in a chance of easing by the end of the year but it is unlikely the BoJ will signal any easing yet.

10th / 12.00	BoE Interest Rate Announcement	5.00%	5.00%	5.25%

	We expect the BoE to cut rates by 25bp to 5.00% at this weeks meeting. While inflation risks are still entrenched in the UK, in our view the MPC will view the downside risk to growth as more alarming. However, market expectation is mixed and there is considerable risk that the MPC will delay action until May. Last week PMI surveys, specifically construction and services, point to increasing moderation in economic activity as rapid deterioration in financial markets sill weigh on the UK. In addition, mounting evidence of tighter credit conditions and subsequent decay in housing prices will tip the scale in favor of rate cut.

10th / 12.45	ECB Interest Rate Announcement	4.00%	4.00%	4.00%

	It is universally expected that the ECB will keep rates unchanged at 4.00%. We anticipate Trichet will sound very hawkish and unwilling to signal any rate move in the near term. The most recent Euro-zone CPI headline estimates for March came in at 3.5% y/y well above market expectations of 3.2%. In addition, Consumer goods PPI inflation, which historically has been a strong indicator of core CPI a year ahead, has risen to 4.3% over the past year. This inflation data will continue to challenge and ECB move to support moderating growth. Also the recent unexpected rise in German industrial production suggest some resilience to weakening global demand and is providing the ECB more room to maneuver.

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