The federal government, eager to boost the flagging economy, will start distributing special stimulus payments Monday - four days earlier than expected.
"Beginning Monday, the effects of the stimulus will begin to reach households," President Bush said Friday. "This money is going to help Americans offset the high prices we’re seeing at the gas pump and at the grocery store."
The department announced the early arrival of the payments Thursday after saying last month that it would begin sending out the money on May 2.
As of next week, 800,000 tax filers daily will begin to have their checks directly deposited Monday, Tuesday and Wednesday. No checks will be distributed Thursday, and 5 million payments will be made Friday.
The payments will go out ahead of schedule because of a new computer program that updates records daily - faster than an older program that updates weekly, according to Andrew DeSouza, a Treasury spokesman.
Overall, the Treasury will distribute more than $110 billion to 130 million taxpayers by July and hopes to get the first $50 billion out by the end of May, DeSouza said.
The checks are the centerpiece of an economic stimulus program signed into law by President Bush in February. The aim is to boost consumer spending and help mitigate problems caused by the slowing economy.
Checks are being distributed to people who file 2007 tax returns http://us-fast-cash-now.com quick payday loan. Those who opt for direct deposit with the Internal Revenue Service will start getting payments before those who use the mail.
The program calls for rebates of up to $600 for single filers making less than $75,000. Couples making less than $150,000 would receive rebates of up to $1,200. In addition, parents would receive $300 rebates per child. Filers who do not owe income taxes but have at least $3,000 in income would get a $300 payment.
Payments to taxpayers slated to get paper checks will start to go out May 9 - one week earlier than originally planned.
The order in which tax filers will receive their payments will be based on the last two digits of their Social Security numbers.
Issue #1 - America’s Money: All this week at noon ET, CNN explains how the weakening economy affects you. Full coverage.
Under the government’s economic stimulus plan, 130 million people will receive tax rebate checks for $300 and up, starting Monday. What do you plan to do with your check? How do you think the stimulus plan will affect the economy? Send us your photos and videos, or email us and tell us what you think.
European Central Bank President Jean- Claude Trichet said the bank must set interest rates with the sole goal of maintaining price stability, rebuffing calls from the French and Italian governments for it to take growth into account.
“It's crucial that the Governing Council sets the appropriate monetary policy stance on the basis of no other considerations than the delivery of price stability in the medium term,'' Trichet said at a conference in Vienna today. The bank's current policy stance “will contribute to achieving our objective,'' he said.
The ECB has held its key rate at a six-year high of 4 percent to contain inflation, which accelerated to 3.6 percent last month, the fastest pace in 16 years. That's helped drive the euro to a record against the dollar, threatening to deepen Europe's economic slowdown and leading to calls from some governments for the ECB to take more account of growth.
French Finance Minister Christine Lagarde said yesterday that the gap between the ECB's benchmark rate and that of the U.S. Federal Reserve is a “bit too big'' and that a “more flexible'' ECB could help narrow the difference. The Fed's main rate is now at 2.25 percent.
Berlusconi Wades In
Italian Prime Minister-elect Silvio Berlusconi said April 16 that the ECB should consider more than just targeting low inflation when setting monetary policy payday loans in 1 hour credit report. “The ECB must have broader functions, with a majority deciding, to go beyond controlling inflation,'' he said.
Trichet repeated that he's concerned about the euro's gains, which are undermining the outlook for European exports. “There have been at times sharp fluctuations between major floating currencies and we're concerned about their possible implications for economic and financial stability,'' he said.
Still, speaking at the same conference as Trichet, ECB council member Klaus Liebscher said the bank has to “closely monitor'' all developments and act preemptively if necessary to prevent surging oil and food prices from feeding into wages.
Economists at Deutsche Bank AG, HSBC Securities and JPMorgan Chase & Co. last week bet accelerating inflation will force the ECB to keep interest rates at 4 percent for longer than previously anticipated. The economists said the bank will start cutting interest rates in the final quarter of this year, having previously anticipated a reduction by the end of the third quarter.
Asia’s fear of impending rice shortages looks to have become something of a self-fulfilling prophecy and exposed the over-reliance of many of the region’s economies on food subsidies and other market-imbalancing steps.
Economic analysts and experts said the sense of crisis should begin to ease with harvests arriving in markets in coming weeks, but policymakers should take this as a wake-up call to start focusing on sustainable increases in productivity.
Spooked by the possibility of a shortfall and surging prices, Asian nations have in recent weeks slapped export curbs on their staple food and subsidized prices, reversing years of economic reform. The measures have helped stoke inflation and sowed more panic, the analysts said.
“The current rice crisis is sort of man-made,” said Randy Barker, acting head of Philippines-based International Rice Research Institute’s social sciences division.
“We sort of created this situation by restricting exports and even on the imports side, countries are trying to build stocks.”
Trade officials are now urging the World Trade Organisation to push food-producing countries to maintain exports to prevent a worsening of the crisis.
“At the moment there is no shortage, but the controls are based on the national security point of view payday loans in 1 hour absolutely free credit report. It’s a decision by governments,” said Kazuyuki Tsurumi, representative of the Food and Agriculture Organization of the United Nations in Manila.
“When the harvest in 2008 becomes clear, maybe some countries’ export bans will be relaxed or lifted I hope.”
Spanish finance minister Pedro Solbes cut his forecast for economic growth this year as the global credit shortage exacerbates the country's housing slump.
The Spanish economy will expand 2.3 percent this year and next, Solbes said at a press conference in Madrid. That compares with the 3.1 percent expansion he predicted for 2008 in December. The economy grew 3.8 percent last year.
“The real estate slowdown is proving more intense than originally foreseen,'' Solbes said. There is “a significant weakening in economic activity.''
The unemployment rate in Spain, once an engine of European job creation, jumped the most in 15 years in the first quarter as 2.7 percent of construction workers lost their jobs. Home sales fell by more than a quarter in the year to January as prices softened and banks tightened lending to potential buyers.
“Spain's getting hit from all sides,'' Dominic Bryant, an economist at BNP Paribas SA in London, said. “This is still the early stages, and unemployment is picking up pretty quickly already.''
Unemployment Rising
The jobless rate rose to 9.6 percent from 8.6 percent in the fourth quarter, the Madrid-based National Statistics Office said today. The last time the rate increased that much was in the first quarter of 1993, when Spain most recently slipped into recession. The number of unemployed rose 13 percent, or 246,000, to 2.1 million people, the report said.
Solbes forecast the economy will add 200,000 jobs this year while the unemployment rate will finish the year at 9.8 percent due to an increase in the number of workers. The jobless rate will reach 10 percent next year, he added.
“This is brutal,'' said Jose Luis Martinez, a strategist at Citigroup Inc. in Madrid. “That this can happen while the economy is still growing around 2.5 percent is really worrying.''
The government's forecast compares with the Bank of Spain's prediction that growth will slow to 2.4 percent this year. The International Monetary Fund says the growth rate will be 1.8 percent, less than half of last year's pace.
The yield on Spain's benchmark government bond fell 1 basis point to 4.45 percent and the price rose, the only of Europe's benchmark government bonds to advance today cash advance payday loans.
Construction Jobs
Europe's fifth-biggest economy created more than half of all new jobs in the euro region in the five years through 2006 as record low interest rates and surging construction fueled a virtuous circle of consumption and hiring. Now that process has gone into reverse as banks shut off funding to homebuyers and a glut of properties is depressing home prices. Mortgage lending fell 28 percent in the year to January.
“This is a credit crunch,'' Angel Berges, managing director of Analistas Financieros Internacionales told an April 7 construction industry conference. “This is a result of the drought that Spanish banks are facing in the international markets.''
Spain's immigrant population is suffering the most from the economic slowdown. The number of unemployed immigrants jumped 24 percent in the quarter to 504,700 while the unemployment rate for that group rose to 15 percent from 12 percent. Even so, another 519,100 foreigners of working-age arrived in Spain in the past year.
House Prices
Real home prices in Spain declined for the first time in a decade in the first quarter weighed down by a glut in supply. Around 800,000 homes built in the past four years remain unsold, according to Bloomberg calculations based on data from the Housing Ministry and Sociedad de Tasacion SA, a real estate valuation company. Cesar Oteiza, director of operations at Idealista.com property web site, says there may also be as many as 300,000 second-hand homes for sale.
Luis de Guindos, chairman of Lehman Brothers for Spain and Portugal, says housing starts will collapse this year, with builders breaking ground on 200,000 new homes after 760,000 last year.
Solbes said there will be a “very substantial reduction'' in house-building this year to return the industry to “a more normal pace.'' The government has said there is demand for around 400,000 new homes a year in Spain.
The Bill & Melinda Gates Foundation will increase spending on farming projects by 50 percent this year as surging food prices threaten starvation and social unrest in poor countries.
The world's largest charitable foundation will give grants for agricultural programs totaling about $240 million this year, up from $160 million last year, said Rajiv Shah, the foundation's director of agricultural development and a former adviser to 2000 Democratic presidential candidate Al Gore.
“We are ramping up activity,'' Shah said in a telephone interview yesterday from Seattle, where the foundation is based. “The focus will be on encouraging extra supply, which is one reason global food prices have climbed so high.''
New funding from Gates for agriculture in poverty-stricken countries comes as food prices soar around the world. The Gates programs aim to increase farm productivity, a task that has received less attention from larger aid institutions.
The proportion of global development aid devoted to agriculture is 4 percent, according to figures from the World Bank. The share of World Bank financing devoted to farming dropped to 12 percent in 2007, from 30 percent in 1980.
“The strength of the foundation is that because it is not constrained by politics, it can afford to take a longer view on food supply,'' said Ruth Levine, a senior fellow at the Center for Global Development, an aid research group in Washington. “They are working on research and activities that have been very under-funded'' by other groups, she said.
Boosting Output
The foundation plans to plow the additional funds into existing projects, including developing more resilient crops, training farmers and helping small producers gain greater access to markets for their goods, Shah said.
For the past two years, the group has invested in seeds that better resist disease and drought, particularly in Africa, where productivity lags behind other developing nations. The effort has already led to more disease-resistant maize varieties for East Africa and sweet potatoes fortified with extra vitamin A, Shah said.
As the global economy accelerated in the past five years, the number of people living on $1 or less a day declined by 150 million, according to the World Bank. Those gains may be reversed unless rich countries step up their donations, officials said.
Global food prices surged 57 percent last month from a year earlier, according to the United Nations, and the World Bank warns civil disturbances may be triggered in 33 countries.
Farm Subsidies
Governments from Guatemala to the Philippines to Indonesia are seeking to combat food inflation by curbing exports or removing import duties on basic food staples such as rice payday loans faxless online payday advances. Brazil called for an end to farm subsidies in developed countries that create price distortions and leave millions of agricultural producers in poorer nations unable to compete.
African countries are expected to be among the most vulnerable to rising food prices. About 70 percent of the continent's population works in farming, according to World Bank figures. Even so, Africa is dependent on foreign producers, importing a net $12.7 billion a year in food.
According to the Gates Foundation, 16 of the 18 most undernourished countries are in Africa.
“The challenge is to ensure that they can sell enough of their goods so that they have an economic incentive to use better techniques,'' Shah said. “We are helping them to meet formal food standards demanded by bigger food producing firms and also talking to these companies in order to link them up with smaller farmers.''
He declined to say which food companies the foundation is negotiating with.
Radio Waves
The Gates crop-improvement program encompasses 16 African countries that aim to give farmers access to better-quality seeds through a network of 9,000 seed dealers.
Gates is also funding projects to provide information through radio broadcasts to help train farmers in Mali, Ghana, Malawi, Uganda and Tanzania. The foundation is funding the development of hermetic storage technology to protect cowpea — one of the most important crops in West and Central Africa.
“Almost no country has achieved a rapid ascent from hunger and poverty without raising agricultural productivity,'' the foundation says on its Web site.
The charity, created in 1994 by the founder of Microsoft Corp. and his wife, focused initially on health and education. In May 2006 it created launched a drive for a “Green Revolution'' in Africa, in partnership with the Rockefeller Foundation.
The Gates Foundation's agriculture staff has only about 35 employees, compared with about 250 staff working on agriculture at the World Bank, the Washington-based lender and grant-maker that's owned by its 185 member countries.
Last year the World Bank devoted $3 billion to agriculture projects.
“The sums of money might be small compared to the World Bank but they get a very big bang for their buck because they are focusing on long neglected areas,'' Peter Timmer, a visiting professor at Stanford University's Program on Food Security and the Environment. “They have chosen a perfect time to focus on this area.''
European Central Bank officials are raising the prospect of interest-rate increases for the first time since the global credit squeeze began last August, stepping up their battle to keep inflation in check.
Comments by policy makers including Axel Weber and Christian Noyer are forcing investors and economists into an about-face after they previously bet the bank would follow the U.S. Federal Reserve in cutting rates to shore up growth.
The ECB officials are reacting to a surge in oil and food prices, which pushed inflation to a 16-year high of 3.6 percent in March. They're concerned that faster inflation will feed into wage demands and prompt companies to pass on higher costs. The contrasting stances by the world's two most important central banks helped push the euro to a record $1.60 yesterday.
“They're not threatening an immediate rate hike, but the hawks are framing the debate now,'' said Nick Kounis, an economist at Fortis Bank NV in Amsterdam who expects the ECB's next step to be an increase in mid-2009. The stronger rhetoric “has been forced on them by the fact that headline inflation has surprised significantly.''
The ECB last month forecast that inflation would average about 2.9 percent this year and 2.1 percent in 2009. The bank aims to keep the rate of consumer-price increases just below 2 percent. The UBS Bloomberg Constant Maturity Commodity Index, which tracks 26 raw materials, has risen 37 percent in the past year, with commodities including oil, corn and rice hitting records.
High Enough?
The Frankfurt-based ECB on April 10 kept its key rate at a six-year high of 4 percent, and President Jean-Claude Trichet said current policy will help the bank achieve price stability. Since then, policy makers including Weber have said they're not sure rates are high enough to contain inflation.
The ECB will “monitor very closely all developments in the coming weeks and decide whether the current level of interest rates ensures we'll meet our objective'' of controlling inflation, Weber, who heads Germany's Bundesbank, said this week.
“If needed we'll move rates,'' France's Noyer told RTL radio yesterday. By contrast, on April 4, he said he was “absolutely certain'' inflation would drop below 2 percent at the end of 2008.
Noyer's colleague Yves Mersch of Luxembourg said the ECB will have to raise the question “every month'' whether an increase in interest rates is necessary, the Financial Times Deutschland reported yesterday, citing an interview.
`Wishful Thinking'
Eonia swap contracts, a widely used market gauge of interest- rate expectations, rose to 4.1 percent yesterday, up from around 3.2 percent in mid-March creditreport bad credit payday loan.
“The market is starting to quickly re-price its rate expectations as it realizes it was wishful thinking to have thought the ECB would follow the Fed in cutting,'' said Guillaume Menuet, an economist at Merrill Lynch & Co. in London, who predicts the ECB will leave its key rate unchanged through 2009.
The Fed has lowered its benchmark rate by 3 percentage points since mid-September, taking it to 2.25 percent, as the U.S. economy teetered on the brink of a recession. The Bank of England on April 10 pared its key rate for the third time, to 5 percent. The Bank of Canada yesterday lowered its benchmark rate by half a point to 3 percent.
Financial institutions worldwide have reported losses or writedowns of $290 billion since the start of 2007. The cost of borrowing euros for three months has surged the most in four months, with the Euribor rate increasing to 4.82 percent yesterday compared with 4.37 percent on Feb. 22, the European Banking Federation said.
IMF Pessimism
Growth in Europe's manufacturing activity slowed more than forecast in April, while a gauge of growth in services industries such as banking and telecommunications unexpectedly rose.
The International Monetary Fund estimates growth in the 15- nation euro region will slow to 1.4 percent this year from 2.6 percent in 2007. Inflation is forecast to drop to 1.9 percent.
As soon as commodity prices start to drop, the ECB needs to lower rates, “not into 2009, but in the next three, six months.'' IMF Europe Director Michael Deppler said in a Bloomberg Television interview this week.
“Inflation expectations may recede rapidly'' if the IMF is right, Noyer told the Wall Street Journal in an interview late yesterday. Interest-rate moves “can go both ways.''
For now, inflation expectations, as measured by French inflation-indexed bonds, are rising, going above 2.3 percent this week from 2.1 percent a month ago, and fueling the ECB's concerns about so-called second-round effects.
Germany's Ver.di union last month negotiated a settlement for as many as 2.1 million public-sector staff that it said was worth 8.9 percent over two years. The German chemical-workers' union last week settled a new contract that raises wages 4.4 percent this year and another 3.3 percent in 2009.
“It would be very challenging for the ECB to lower interest rates, particularly in the months ahead,'' said Julian Callow, chief European economist at Barclays Capital in London. “As for rate increases, they can't be ruled out.''
A lone U.S. entrepreneur is taking on the Goliath of Chinese big business in a pre-Olympics contest, claiming his rights to proceeds possibly worth millions from the state-of-the-art Olympic basketball arena complex.
The developers have in mind a huge shopping mall, office and hotel complex around the Wukesong Indoor Arena, one of the cornerstones of the newly formed $2 billion NBA China, once the Augusts Games are over.
Real estate expert Matthew Carberry, a Beijing resident, says in his complaint he was taken on to negotiate with the NBA on behalf of CAAC Real Estate Development Co. (ACRE) and Wukesong Culture and Sport Centre to set up a long-term business relationship between the NBA and the arena.
Basketball is likely to be one of the biggest drawcards of the Games with China’s many millions of NBA fans hoping that Houston Rockets centre Yao Ming can inspire the national team to victory at the 18,000-seat arena.
According to Carberry’s complaint, a copy of which was seen by Reuters on Sunday, he traveled overseas at least seven times, visiting more than a dozen U.S free credit report and score same day payday loans. cities to meet the NBA, view arenas and talk to stadium operating and ticket companies.
He says he put thousands of hours into the project involving more than 7,000 emails.
The result was a “cooperative agreement”, signed by NBA Commissioner David Stern and ACRE, in which the two sides became partners.
But since the agreement, he says, ACRE told him “the base for compensation” had been changed and its board of directors refused to pay “entire agreed compensation”.
The Spanish government approved 18 billion euros ($28 billion) of emergency tax cuts and spending to shore up an economic expansion undermined by a slumping housing market and the global credit shortage.
The measures, passed by decree today and enacted immediately, will provide a 400-euro tax rebate to all workers and pensioners, part of 10 billion euros of outlays this year. The remaining 8 billion euros are earmarked for next year.
Prime Minister Jose Luis Rodriguez Zapatero is tapping a budget surplus to cushion the effect of a slowing economy, which the International Monetary Fund forecasts will ease by more than half this year to 1.8 percent. House prices in Spain fell in real terms for the first time in 10 years in the first quarter after tripling in the past decade.
“The economic and budget policy of this government in the last four years has allowed us to accrue a surplus in the public accounts,'' Deputy Prime Minister Maria Teresa Fernandez de la Vega said at a press conference in Madrid “This lets us take measures to stimulate the economy, to reinvigorate job creation and to help people and families in greatest difficulty.''
Home sales imploded in the first quarter, declining 23 percent on the year, while shares of real-estate developers have collapsed. The stock of unsold homes in Spain is more than 600,000, according to Alberto Espelosin, a strategist at Zaragoza, Spain-based Ibercaja Gestion.
Developers' Shares
Inmobiliaria Colonial SA, Spain's third-largest developer, has lost three-quarters of its value in six months. This week, Barcelona-based Grupo Aisa SA fell to the lowest since the shares first traded in Madrid in 1999 after a court said it will consider whether to declare it insolvent.
The global credit crunch stemming from the collapse of the U.S pay day loans cash advance flexible payments. housing market is exacerbating Spain's own housing slump by restricting funds available for banks and homebuyers. Mortgage lending fell 28 percent on the year in January.
“If this episode is prolonged, its effects on the Spanish economy may be significant, since it is an economy in which external financing is a basic element of its growth,'' Bank of Spain governor Miguel Angel Fernandez Ordonez said April 15. “That the real estate cycle matured at the same time as international financial tensions emerged has been particularly unfortunate for our economy.''
Jobs, Services
There are signs that the housing slowdown is beginning to drag down other areas of the economy. Jobless claims have jumped by more than 280,000 in the past six months and activity in services plunged in March, an index of purchasing managers indicated. Manufacturing contracted for a fourth month.
The stimulus package will add 0.2 or 0.3 percentage point to economic growth this year, Finance Minister Pedro Solbes said at the same press conference.
One measure waives the fees charged by banks and notaries to extend a mortgage for the next two years, making it cheaper for homeowners to lower their payments by stretching out the life of the loan. The government also abolished the wealth tax and announced a 200 million-euro program to help unemployed construction workers find jobs.
The Ministry of Public Works has already accelerated its tendering process this year, Solbes added. The ministry awarded 6 billion euros of contracts in the first quarter, almost double the amount in the year-earlier period.
Expectations that the Bank of Japan will cut interest rates have plunged in the past month as investors bet new Governor Masaaki Shirakawa will maintain a policy of gradually raising borrowing costs.
Investors see a 6 percent chance the bank will lower its key overnight call rate by December, down from 71 percent on March 20, the day Shirakawa became acting chief, according to calculations by JPMorgan Chase & Co. They were around 34 percent last week, when he was appointed governor. Japan's benchmark rate is 0.5 percent, the lowest in the industrialized world.
The appointment of central bank veteran Shirakawa, who has long argued that Japan's rates need to be normalized, reduces the chances of the first reduction in seven years, analysts said. Receding concern that the world's second-largest economy will follow the U.S. into a recession is also damping speculation of easier credit.
“The market is starting to assess and build in the potential hawkishness of Shirakawa,'' said John Richards, head of debt-market strategy for the Asia-Pacific region at RBS Securities Japan Ltd. in Tokyo. “Once the world gets out of recession mode, Shirakawa will be inclined to tighten.''
The yield on three-month euroyen futures, debt derivatives that are sensitive to changes in interest-rate expectations, rose to the highest in four months today. The yield on Japan's five- year note added 4 basis points to 0.895 percent today, the highest in seven weeks.
The International Monetary Fund last week said Japan's economy will grow 1.4 percent in 2008, after saying in January it will expand 1.5 percent. The IMF forecast U.S. growth of 0.5 percent, down from 1.5 percent predicted previously payday advance lender cash advance loan.
Easing Concern
Concern that Japan's economy is faltering eased in the past month, with reports showing export growth quickened, wages rose and companies faced the largest labor shortages in 16 years.
“Japan's economic growth is decelerating, but the pace is much milder than the U.S. and Europe,'' said Chotaro Morita, head of fixed-income strategy research at Barclays Capital Japan Ltd. “Speculation for a rate cut in the market was based on the economy's weakness, and that speculation is being corrected.''
Morita added that investors paring bets doesn't mean a cut is off the table, as the Bank of Japan may need to lower rates if a meltdown in global financial markets requires coordinated action with other central banks.
No Preconceptions
Shirakawa last week said he has no preconceptions about the policy direction because the economic outlook is “filled with uncertainties that could quickly subside.'' The veteran of 34 years at the bank also said providing too much economic stimulus in the short term could hurt long-term growth and has described Japan's monetary conditions as “very accommodative.''
Japan's central bank has kept the benchmark rate at 0.5 percent since doubling it in February 2007. Shirakawa, who was promoted to the top post to fill the bank's first vacancy in more than 80 years, this week said that the impact of the subprime- mortgage crisis on Japanese banks has been limited and that economic growth will probably pick up eventually.
China's economy probably expanded more than 10 percent in the first quarter and inflation may have stayed near an 11-year high, maintaining pressure on the government to do more to cool prices.
Gross domestic product rose 10.4 percent in the first quarter from a year earlier, according to the median estimate of 24 economists surveyed by Bloomberg News, after expanding 11.2 percent in the previous three months. The statistics bureau is due to release the figure at 2:30 p.m. tomorrow.
Faster yuan gains failed to stop inflation topping 8 percent for a second straight month in March, according to the survey. China's cabinet, the State Council, said this month that the world's fastest-growing major economy faces dual risks: overheating and the threat of a slowdown.
“Slower growth and high inflation have trapped the central bank in a difficult position,'' said Sherman Chan, an economist at Moody's Economy.com in Sydney. “The authorities obviously do not want to see a sharp slowdown in economic growth, as it may have social implications, but high inflation is also a huge concern.''
The worst blizzards in half a century and weaker overseas demand for China's goods trimmed first-quarter growth.
Inflation may have eased to 8.2 percent after an 8.7 percent increase in February. The government aims to bring inflation down to 4.8 percent in 2008, matching the level for all of last year.
Stocks Tumble
The benchmark CSI 300 Index of stocks has tumbled 35 percent this year, partly on concern that government measures to cool prices will dent earnings. The index was down 1.8 percent as of the 11:30 a.m. break in trading in Shanghai after falling 6.5 percent yesterday.
To cool prices, China has let the yuan appreciate 4.4 percent this year versus the dollar, reducing import costs. It has also imposed price controls and raised banks' reserve requirements to a record.
“Tackling inflation requires a cocktail of measures and faster currency appreciation is one important ingredient,'' said Tao Dong, chief Asia economist at Credit Suisse Group in Hong Kong. Tao expects the yuan to climb at least 10 percent versus the dollar this year after a 7 percent gain in 2007, helping to reduce inflows of trade cash that threaten to fuel inflation payday advance cash advance.
China's foreign-exchange reserves, the world's largest, surged to $1.68 trillion at the end of March. The trade surplus pumped $41.4 billion into the financial system in the first quarter and foreign direct investment added $27.4 billion.
Borrowing Costs
Interest rates have stayed unchanged this year, after six increases in 2007, as the government tries to avoid encouraging inflows of speculative capital. Even so, Zhou Xiaochuan, the governor of the People's Bank of China, said this week that there's still room for an increase. The key one-year lending rate stands at 7.47 percent, while the one-year deposit rate is 4.14 percent.
Surging global commodities and food costs are maintaining pressure for China's prices to keep rising. World food prices rose 57 percent last month from a year earlier, according to the United Nations.
“We probably haven't seen the peak in prices yet, because rice prices are soaring and the rise in other staple food costs is also showing no sign of a slowdown,'' said economist Chan, of Moody's Economy.com. “Overall, the inflation problem is due to supply shortages.''
Blizzard Disruptions
Snowstorms crimped first-quarter growth by disrupting the production of companies such as Zhuzhou Smelter Group Co. and Chenzhou Mining Group Co. A weakening appetite for exports may further cool China's expansion.
Group of Seven nations' policy makers said April 12 that a world economic slowdown may worsen amid an “entrenched'' credit squeeze. China's export growth slowed in the first quarter and the trade surplus narrowed for the first time in more than three years as U.S. demand waned.
The following table shows economists' estimates for percentage changes in China's gross domestic product in the first quarter from a year earlier.
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