Central Banks Dominate Headlines on a Key Week of Decisions

[B]Weekly Bank Research Center 7-02-07[/B]


[B] [B][B][B] [B][/B]
[B] Will the Real Employment Data Please Stand Up?
[/B]
[/B]
[/B]
[/B] [/B] [I][I] Stephen Roach, Head Economist, Morgan Stanley [/I] [/I]

The verdict is in: Job growth has slowed significantly, and more is coming. But there are still important questions about the real underlying pace of job growth, because in 2007, two measures of employment have traded places. Measured by the payroll survey, job gains have slowed by less than in the household canvass ? the opposite of the 2006 results. Which metric is correct? And does it matter? After all, it appears that the dichotomy between weak growth and relatively firm labor markets that we dubbed the employment conundrum only a few months ago is ending (see “The Employment Conundrum,” Global Economic Forum, April 9, 2007). As expected, the economic slowdown is stabilizing while the deceleration in both hours and employment persists, so that productivity growth may be bottoming out.
Full Story

                       [B] [B][B][B] [B]  Risk of Rate Rise at Upcoming MPC Meeting  

[/B]
[/B]
[/B]
[/B] [/B] [I] Trevor Williams, Chief Economist at Lloyds TSB Financial Markets [/I]
We have calculated a scorecard of UK economic data since the last Monetary Policy Committee (MPC) meeting to help to assess the likelihood of a change in policy at the July meeting. This scorecard, in table 1, suggests that the official short term interest rate is likely to rise this month. This is despite the narrow 5:4 vote to keep Bank Rate at 5.5% in June, and the perception that not much has changed in the economic and market data since the last meeting and the upcoming July meeting to warrant a rise in rates. So why a rise? The reason is, overall, data in the past month do suggest that economic conditions warrant a further hike. Moreover, our analysis of some key long term averages also supports a further small rise in rates, but suggests that the next move up is likely to be the peak.

Full Story

                                                                                                                          [B] [B][B][B] [B][/B] 

[B] Continued Global Tightening of Monetary Policy - Also by the Fed in 2008
[/B]
[/B]
[/B]
[/B] [/B] [I] Niels-Henrik Bjørn Sørensen, Senior Analyst, Danske Bank
[/I]

The global economy is on a roll. Even though the US economy has switched down a gear in some quarters, the upswing has steamed ahead in the rest of the world. Tightening of global monetary policy has thus continued outside the US, while the Federal Reserve has stood firm. While this division of policies between the central banks will continue in the short term, there is a risk of a tighter US monetary policy in the longer term.

Full Story

                                                                                                                                                                                                                                                                                                                             [B] [B][B][B] [B]  Canadian GDP Flat in April, but Rate Hike Still Likely  

[/B]
[/B]
[/B]
[/B] [/B] [I] Steve Chan, Economist, TD Bank Financial Group [/I]
Like the yo-yo and the hula-hoop, fads come and they go. The current fad in economic circles is to discuss the menace of global inflation. There is certainly more inflation in the world than was expected 12 months ago. While opinions at the time varied as to the extent of the weakness to come, the thinking was that the U.S. housing market was faltering, this would bring U.S. consumers down with it, and ultimately, diminished demand would filter through trade and investment flows to economies around the world. The U.S. housing market has stuck closely with the script, but U.S. consumers and other economies have largely ignored this. It is important to remember though that inflation comes from growth. If the current global economic strength remains, as we expect, central banks will continue to raise interest rates to head off inflationary pressures. In other words, inflation would be a sign of strength. But, should demand falter, the global inflation story will prove to be little more than a phantom menace, and end up in a box in the back of the closet with the hula-hoops.

Full Story

             [B] [B][B][B] [B]  Other Pre-screened Independent Contributors[/B]

[/B]
[/B]
[/B] [/B] [I] J-Chart [/I]
J-Chart is an innovative charting and bias-neutral market analysis tool. Based on its proprietary theoretical concept and display of market price action, J-Chart provides a much clearer and unique insight into the market than conventional charting methods. This innovative charting and market analysis tool is designed to visualize market price action that constructs unique price patterns called “Equilibriums”. Based on its “non-fixed time frame” concept and “Kinetic Equilibrium” application, J-Chart users are able to forecast markets’ future movements with high accuracy.

J-Chart Weekly Newsletter
</SPAN>