BNM retains OPR at 3% for sixth time
Bank Negara Malaysia retained its Overnight Policy Rate (OPR) at 3% for the sixth time, at its Monetary Policy Committee (MPC) meeting Friday. The central bank in a statement said while the Malaysian economy was affected by global developments, domestic demand continued to support growth, driven by firm consumption and investment activity. It added that this trend is projected to continue as private consumption is supported by stable employment conditions, income growth and public sector measures. Bank Negara said
investment activity was mainly led by domestic-oriented industries as well as the commodity and public sectors. On inflation, it said headline inflation is expected to moderate this year, with improved domestic supply and stable demand conditions. (Bernama)
China: Swap-rate drop signals more easing after ratio cut
China’s third cut in banks’ reserve requirements since November will be followed by more aggressive monetary easing as the economy’s slowdown deepens months before a once-in-a-decade leadership change, interest-rate swaps show. The People’s Bank of China on 12 May lowered banks’ reserve requirements by 50bps, a day after data showed April industrial production, new loans and retail sales grew less than forecast. The one-year swap rate, the fixed cost to receive the floating seven-day repurchase rate, fell 23bps last week to 3.13%, the biggest drop in six months. Premier Wen Jiabao is ensuring companies have sufficient cash, injecting funds into banks for seven straight weeks and approving record bond sales, to help arrest deceleration in the world’s second-largest economy. The deterioration further imperils global growth already weighed down by Europe’s intensifying crisis and America’s job-market woes. (Bloomberg)
Japan: Shirakawa urges Japan to cut deficit for yen stability
Bank of Japan Governor Masaaki Shirakawa urged reduction of the nation’s deficit to stabilize the yen as the bond market may come under pressure if investors lose trust in fiscal policy, the Asahi newspaper said. The yen might become unstable, triggering uncontrollable inflation should the central bank buy government bonds in an attempt to prevent a financial crisis, Shirakawa said. The BOJ is under pressure to add stimulus as a group of lawmakers proposed overhauling the BOJ’s governing law to ensure steps to end deflation afflicting the nation for more than a decade. The BOJ said its 1% inflation goal will be achieved before long after it expanded by JPY10trn (USD125bn) on 27 April its plan for government-bond purchases as the world’s third-largest economy showed signs of slowing. Prime Minister Yoshihiko Noda’s party sent a bill to parliament to double the sales tax by 2015 to rein in the world’s largest public debt over the objections of opposition lawmakers. (Bloomberg)
EU: Officials begin to weigh Greek exit from common currency
Greece’s possible exit from the euro area moved to the center of Europe’s debt-crisis debate, with officials beginning to weigh the fallout of a withdrawal even as authorities in Athens struggled to form a government. Meetings brokered by Greek President Karolos Papoulias are set to continue today after Syriza, the largest anti-bailout party, rejected a unity government following last week’s inconclusive elections. The country where the 2 1/2-year-old crisis began moved closer to a new vote, and to the possibility of a euro-area exit that was once a taboo among policy makers. Greek withdrawal “is not necessarily fatal, but it is not attractive,” European Central Bank Governing Council member Patrick Honohan said. An exit was “technically” possible yet would damage the euro, he said. (Bloomberg)
US: Consumer sentiment climbs to four-year high
Consumer confidence rose in May to the highest level in four years, led by gains among upper-income Americans that may contribute to a pickup in spending on expensive items like furniture and appliances. The University of Michigan preliminary sentiment index for May climbed to 77.8, the highest since Jan 2008, from 76.4 the prior month. For the first time since monthly data began in 1978, it advanced for a ninth-straight time. A jobless rate that has dropped to the lowest level in three years and a housing market that shows signs of stabilizing may be helping lift Americans’ spirits. The unexpected gain in confidence signaled consumer purchases, which account for 70% of the economy, can keep expanding after growing at the fastest pace in more than a year. (Bloomberg)
US: Economy in US buoyed with autos spurring glass-to-steel growth
Car sales that are running at the fastest pace in four years are poised to reverberate through the world’s largest economy as a spillover into production, profits and jobs for Americans may be starting. Auto purchases have exceeded a 14m annual rate in each month this year, the strongest performance since early 2008, according to Ward’s Automotive Group. Government data show motor-vehicle output contributed half of the first quarter’s 2.2% economic growth. General Motors Co., the world’s largest automaker last year, boosted its 2012 industry-sales forecast, Ford Motor Co. will add factory shifts and Chrysler Group LLC is stepping up hiring as demand rises. (Bloomberg)
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