Retail sales rose unexpectedly in May 3.5 percent after falling 0.2% the prior month and far better than median estimates of a 0.1% fall which was the the highest since records began 20 years ago; while compared with a year earlier retail sales rose 8.1% from 4.2% and well above the 4.1% expected rise according to the Office for National statistics today.
Also the M4 which is considered the widest measure for money supply rose in May 0.4% down from 0.6% the prior month and slightly below the 0.5% expected rise, while compared with a year earlier M4 rose 10.0% down from 11.1% and also below the 10.5% expected rise!
The U.K. economy is expected to slowdown this year as falling home prices and limited access to credit are threatening to end a decade of expansion, while on the other hand inflation is expected to exceed 4% this year according to the BOE projections!
The BOE most probably won't cut rates anymore this year as they seem determined into fighting rising inflation even if it ended hurting Britons' living standards according to Mr. King, yet possibilities of a rate hike are also slim for the time being since the outlook for inflation remains unusually high!
Inflation now is becoming a world dilemma as the Swiss National Bank decided to keep their rates unchanged at 2.75 percent even as the economy is slowing down on fears from rising inflation! The Swiss economy grew only by 0.3% in the first three months of this year to mark the weakest pace in nearly three years!
Yet the prospects of further rises in prices on the back of the seemingly never ending rise in food and energy prices continue to pressure central banks and force them into adopting a rather Hawkish stance even as their economies are slowing considerably.
Later today Canada will release their consumer price index and expectations are also to see further inflationary pressures mounting even after the economy contracted during the first three months of this year, and the upside outlook for inflation forced Bank of Canada into leaving their rates steady at 3.00%!
While the U.S. will provide us with further data from the manufacturing sector which acccount for nearly 10% of the economy, also the weekly jobless claims should continue to highlight on going weakness in the labor market!
The new theme for central bankers this year is going to be inflation, yet this week seems to be rather calm for the currencies until further data can decide the path of monetary policies from all central banks, yet it's becoming clear that Hawks will take over Doves in 2008!