China c.bank to maintain prudent monetary policy, eyes on shadow banking risks
China’s central bank said on Friday that it will maintain a prudent and neutral monetary policy and keep liquidity basically stable. China will also strengthen oversight to prevent risks in the shadow banking category, including asset management products, the People’s Bank of China (PBOC) said in its first-quarter monetary policy implementation report. The PBOC said it will provide necessary liquidity support for “reasonable growth of credit” but will control the increase in non-performing loans and restrict credit flowing into speculative housing purchases.
Rebound in U.S. Consumer Prices Shows Inflation Stabilizing
A rebound in U.S. consumer prices in April signals inflation is stabilizing, supporting the case for Federal Reserve policy makers to raise interest rates, Labour Department figures showed Friday.
Businesses are regaining some pricing power as household spending grows and improving global demand helps to stabilize commodity costs, adding to signs that inflation is on track to meet or possibly exceed the Fed’s goal in coming months. The central bank’s preferred gauge of inflation, a separate figure based on what consumers purchase, exceeded its 2 percent goal in February, though some Fed officials focus on the measure excluding food and energy, which remains below their target.
• The increase was driven by shelter, energy, tobacco and food
• Energy prices rose 1.1 percent from previous month, with rises in gasoline, natural gas and electricity; food costs advanced 0.2 percent, the fourth straight gain
• The gauges for new and used vehicles both fell; costs of mobile-phone services, medical care, apparel and recreation also declined
• Shelter costs rose 0.3 percent, with a 0.2 percent increase in owners-equivalent rent, one of the categories designed to track rental prices
• Prices for medical care dropped 0.2 percent, the most since May 2013, reflecting a record 0.9 percent monthly decline in prescription-drug prices
• Hourly earnings adjusted for inflation rose 0.4 percent from April 2016, after a 0.3 percent gain, a separate report from the Labour Department showed
• Before it’s here, it’s on the Bloomberg Terminal.
Euro zone bond yields dip as growth worries weigh
Doubts over the global growth outlook and the pace at which the European Central Bank will move towards tighter monetary policy sent European government bond yields lower on Friday as investors eyed a handful of planned debt sales next week. Analysts said there was talk of an upgrade of Ireland’s credit rating by Moody’s in a scheduled update on the country due on Friday and a soft tone to stock markets offered some support to prices generally. Greek government bond yields – still minimally traded after years of debt crisis and EU bailouts – were also volatile and mixed as investors weigh the chances of a test return to bond issuance this summer. But the main topic of discussion was hints of weakness in wage growth and inflation at the end of a week that has seen the Bank of England cut its forecasts and New Zealand’s central bank shock markets by not shifting to a tighter policy stance. In Europe, ECB policymakers have sounded cautious on any swift move to rein in the bank’s bond-buying programme later this year, cooling expectations for what it may say after its next policy meeting next month. An unexpected 0.1 percent fall in euro zone industrial output on Friday also played in.