Fed to weigh hit of credit crunch

(Reuters) - The Fed is widely expected to hold overnight interest rates steady at 5.25 percent, where they have been for more than a year. The policy-setting Federal Open Market Committee is expected to release a statement outlining its views on the economy at around 2:15 p.m. on Tuesday.




Markets will watch keenly for any sign the U.S. central bank, which has persistently identified the risk of inflation as its main concern, is beginning to worry a bit more about the potential for an undesirable weakening in the economy.


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Zambia sees 2007 inflation down to 5.0 pct - c.bank

(Reuters) - Zambia should reduce annual inflation to five percent in 2007 from 8.2 percent the previous year, aided by higher global metal prices and a domestic food surplus, the central bank said on Tuesday.

Bank of Zambia (BoZ) governor Caleb Fundanga also said the country's economic indicators were positive ahead of the International Monetary Fund's (IMF) review of performance in the third quarter of the year.


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TREASURIES-Bonds trim losses as stocks gain

(Reuters) - Treasuries were little moved by mixed economic data that
painted a picture of benign inflation pressures and slower
economic growth, but surprisingly upbeat consumer sentiment.
For details, see [ID:nN30403317], [ID:nN30443227]




Treasuries rose sharply last week, pushing yields to
two-month lows on Friday after the stock market suffered its
greatest loss nearly five years.


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GLOBAL MARKETS-Stocks rally worldwide as credit markets calm

(Reuters) - Earnings from General Motors Corp. sharply exceeded
Wall Street's estimates, driving its stock up nearly 3 percent
and lifting the Dow industrials as it increased investor
optimism about U.S. corporate profits.




The broad market also was bolstered by an inflation
indicator that rose less than expected in June.


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US STOCKS-Wall St. rises on data, GM earnings

(Reuters) - NEW YORK, July 31 - U.S. stocks climbed on
Tuesday after General Motors Corp. added to optimism
about corporate earnings and a key inflation indicator showed a
smaller-than-expected rise.




GM shares jumped 6 percent to $34.56 after the blue-chip
automaker swung to a profit in the second quarter and handily
topped Wall Street's expectations. For details, see
[ID:nN30442082].


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S.Africa credit points to rate hike, trade gap up

(Reuters) - Demand for credit by South Africa's private sector grew at a faster pace in June, hardening the case for higher interest rates to curb spending, while a wider trade deficit pointed to continued pressure on the current account.

The Reserve Bank has raised its repo rate by 250 basis points to 9.5 percent since mid-2006 to tame inflation and robust consumer demand, but spending, driven by credit, remains high.


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Taiwan 10-Year Bonds Fall on Concern Higher Oil Prices Will Spur Inflation

(Bloomberg) -- Taiwan's government bonds declined
on speculation an increase in crude oil prices will spur
inflation. The currency was little changed.

Ten-year notes ended a three-day gain after oil rose to the
highest in nearly a year in New York last week as a government
report showed the U.S. economy, the world's biggest consumer,
grew faster than expected last quarter. Inflation erodes the
purchasing power of the fixed-income payments from debt.


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UPDATE 1-Mexico holds rate steady despite higher inflation

(Reuters) - The bank said it sees inflation, which has been stubbornly
trending higher, closing in on its long-term 3 percent target
by the end of 2008 even though food prices are still high.




Mexico's 12-month inflation nudged into the central bank's
danger zone in the first half of July, increasing expectations
of an interest rate hike some time this year, although most
analyst did not expect an increase on Friday.


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European Bond Yields Hold Near Lowest in Two Months as Stocks Decline

(Bloomberg) -- European bond yields held near the
lowest in two months as stock markets across the region fell and
corporate-debt risk surged to a record

Bunds reversed earlier losses on speculation investors
switched to the safety of government securities. Benchmark 10-
year yields rose earlier after data showing consumer-price
inflation accelerated in Germany in July, adding to the case for
the European Central Bank to keep raising interest rates.


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FED FOCUS-Slower productivity may be risk to growth

(Reuters) - Lower productivity growth, if permanent, is worrisome for
policy-makers as it could fan inflation through higher wage
costs, potentially prompting a tightening of credit and making
it harder to foster growth.




Fed Chairman Ben Bernanke told Congress last week that the
slowdown in productivity growth in recent quarters is likely
temporary, but that the underlying pace of productivity gains
may also have "slowed somewhat."


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New Zealand Dollar Advances Above 80 U.S. Cents on Rate Rise Speculation

(Bloomberg) -- The New Zealand dollar rose
above 80 U.S. cents to a 22-year high as the prospect of another
increase in interest rates this week lures investors to the
nation's higher-yielding assets.

The currency has gained 14 percent this year as the central
bank raised the benchmark rate three times in a bid to subdue
consumer demand, which it says is boosting inflation. There is a
67 percent chance bank Governor Alan Bollard will raise the
official cash rate by a quarter-percentage point for a fourth
time at his monetary policy review on July 26, according to a
Credit Suisse Group index based on interest-rate swaps trading.


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China's Exported Inflation May Signal Interest-Rate Pressures Around Globe

(Bloomberg) -- The rising cost of goods the U.S.
imports from China may be an early warning signal that central
bankers from the U.K. to India are about to pay a price for a
cause they've championed: globalization.

China, a source of cheap manufactured products for the past
two decades, may be starting to export inflation as the world
economy grows at the fastest pace in a generation.


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Nigerian inflation climbs to 6.4 pct in June

(Reuters) - Nigerian consumer price inflation accelerated to 6.4 percent year-on-year in June from 4.6 percent in May, the National Bureau of Statistics said on Friday -- a setback to government which has made low inflation a priority.

"The rise in the index was caused mainly by increase in the price of some food items, fuels, some building materials, transportation and services," the bureau said in a statement.


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TREASURIES-Rally fades ahead of Bernanke encore

(Reuters) - Anxiety over troubled mortgage investments has kept bonds
afloat in recent sessions, briefly pushing benchmark yields
back below 5 percent.




Federal Reserve Chairman Ben Bernanke reinforced the rally
on Wednesday by zeroing in on subprime or high-risk home loans
in his congressional testimony. Downbeat housing data and
relatively tame inflation figures have also supported bonds.


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Election of Erdogan May Boost Turkish Shares, Cheaper than All of Europe's

(Bloomberg) -- Turkish stocks, cheaper than equities
in the markets of the European Union, are attracting investors
who say this year's rally is just the beginning.

Prime Minister Recep Tayyip Erdogan, who has sold state
industries and reduced the budget deficit, will retain power in
this weekend's elections, according to six opinion polls. The
mostly Muslim nation of 72 million has had 21 straight quarters
of economic growth and inflation is near a five-year low.


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Core inflation helps predict price trends: Bernanke

(Reuters) - By stripping out volatile food and energy prices, the Fed can better track future inflation trends, he said.




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Treasuries Rise on Forecasts From Bernanke, Weakness in Subprime Mortgages

(Bloomberg) -- Treasuries rose, pushing the
benchmark 10-year note's yield below 5 percent, after Federal
Reserve Chairman Ben S. Bernanke predicted inflation will recede
and said housing market weakness may slow economic growth.

The Fed also trimmed its forecast for economic growth this
year because of a slowdown in homebuilding, and an index linked
to the lowest-rated securities backed by subprime mortgages fell
to a record.


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UPDATE 2-Bernanke:Housing drag may persist, inflation a worry

(Reuters) - WASHINGTON, July 18 - Federal Reserve Chairman
Ben Bernanke told Congress on Wednesday the U.S. economy will
grow gradually this year and gain steam in 2008, but warned
there are many risks to the outlook and stressed the U.S.
central bank is on guard against inflation.




"Overall, the U.S. economy appears likely to expand at a
moderate pace over the second half of 2007, with growth then
strengthening a bit in 2008 to a rate close to the economy's
underlying trend," he said in semiannual testimony prepared for
delivery to the House of Representatives Financial Services
Committee.


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SanFran Fed sees core inflation holding below 2 pct

(Reuters) - "We anticipate that core inflation will fall and remain
below 2 percent this year and next," economist Glenn Rudebusch
said in the bank's latest "FedViews."




The outlook is a shift from June's forecast, which showed 2
percent as a floor to the core personal consumption
expenditures price index through the end of 2008.


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Dollar Drops Versus Yen, Euro After Fed Lowers Economic Growth Estimates

(Bloomberg) -- The dollar fell against the yen and
euro as the Federal Reserve lowered its forecasts for U.S.
economic growth for this year and next as home building is
weaker than anticipated.

The revisions came as Fed Chairman Ben S. Bernanke, in
semiannual testimony to the House Financial Services Committee,
predicted U.S. economic growth will pick up slightly next year
and inflation will gradually recede. He also said he expects a
slump in construction to continue to ``weigh'' on growth.


Read more at Bloomberg Currencies News