Monday, October 27, 2003
Bank of England minutes unsettle markets
At their October meeting, the Bank of England's Monetary Policy Committee voted four to three to maintain interest rates at 3.5 percent. The result, a surprise to analysts, saw the minority vote for a 25 basis point increase. All members agreed that consumer demand for housing may not slow as rapidly as previously thought. Some members were worried about a future shock to demand from consumers' increasing debt levels. Those backing an interest rate increase expressed concerns about increasing prices, saying that inflation was clearly likely to be above target in two years' time, primarily because of higher domestic demand. Those opposing the hike argued for delay, with the bank set to produce a full set of new forecasts in its November quarterly inflation report.
New Bank of France governor
The French government appointed Christian Noyer, former European Central Bank vice president, to replace Jean-Claude Trichet as governor of the Bank of France for a six-year term. Noyer's main challenge will be to implement the downsizing begun by Trichet aimed at slashing the number of local branches by over half and reducing employees by nearly 2,500 in order to restore profits. As head of the French bank, Noyer will return to the ECB as a voting member on the Governing Council after four years on the bank's executive board from 1998 to 2002. Like Trichet, he is convinced of the need for a close dialog with eurozone governments and finance ministers to seek an optimum mix of monetary and financial policy.
A down week
With few economic indicators released last week, investors were honing in on earnings reports with greater intensity. And they found that although many profit statements matched expectations, they were not quite good enough to send stock prices higher. As a result, all 13 indexes followed here were down on the week for the first time since the week ending March 7th. Thursday's plunge in Japanese and Hong Kong stocks was contained and did not spread to other markets. The precipitous drop in the Nikkei, Topix and Hang Seng did not help the overall market's psyche, but didn't seem to harm it either as those indexes stabilized on Friday.
Investors get edgy
