Economy Highlights

Euro - Euro region may shrink on unrest, FX concepts says

Some nations may leave the euro bloc as the sovereign-debt crisis results in political unrest and voter anger, FX Concepts LLC Chairman John Taylor said.“We’ll have a smaller euro, a more cohesive euro and a more rational euro because some of these countries should not be in there,” Taylor said at the Bloomberg European Debt Briefing conference hosted by Bloomberg Link in New York today. “The catalyst will be political rather than economic. Not political at the elite level but rather political at the street level. Maybe it will take a decade or two.” (Bloomberg)


US - Fed to pursue QE even as business lending gains

The Federal Reserve will probably push forward with USD600bn in securities purchases even as the biggest jump in business loans in more than two years adds to signs the U.S. economy is gaining strength. Commercial and industrial loans increased at an annual rate of 7.6% last month, the largest gain since October 2008, according to Fed data. Total bank credit has risen in three of the past six months as business loans cushioned against declines in real estate and consumer credit. (Bloomberg)

UK - Economy shrinks by shock 0.5%

Britain's economy shrank by a shock 0.5% in the fourth quarter of 2010, dashing expectations for growth, as freezing weather sparked the first contraction since 2009, data showed Tuesday. GDP fell 0.5% in the three months to December, after expansion of 0.7% in the third quarter, the Office for National Statistics (ONS) said in a statement giving its initial estimate. That was the first drop since the third quarter of 2009 and confounded expectations for modest growth of 0.4% in the fourth quarter, according to analysts polled by Dow Jones Newswire. (Business Times)


India - Central bank raises key interest rates

India’s central bank raised key interest rates yesterday by a quarter point each, as expected, in a bid to clamp down on resurgent inflation and warned that higher food prices could become entrenched if steps to boost output are not taken. The increase in key rates was the seventh since March, and while the 25 basis point rises were expected, a growing number of analysts had said in recent days that a 50 basis point increase was needed. The RBI raised its repo rate, at which it lends to banks, to 6.5% from 6.25%. It lifted the reverse repo rate, at which it borrows from banks, to 5.5% from 5.25%. (StarBiz)



US - Confidence increases more than forecast

Confidence among US consumers rose more than forecast in January, reaching an eight-month high, as the outlook for jobs brightened. The Conference Board’s sentiment index increased to 60.6 from 53.3 the prior month, figures from the New York-based private research group showed today. Another report showed home values dropped in November by the most in a year. Growing optimism, an improving labor market and tax relief may combine to help spur consumer spending, which accounts for about 70% of the economy. (Bloomberg)