US stocks decline as Fed minutes show concern on deflation

US  stocks fell from all-time highs as  Fed  minutes showed some members said the central bank should remain attentive to the possibility prices in the economy  aren’t  rising  fast  enough.  The  S&P  500  Index  fell  0.2%  to 2,048.72. The Dow lost 2.1 points (less than 0.1%) to 17,685.73.

Fed officials on guard for signs of lower inflation expectations

Fed  is  on  guard  for  signs  that  investors  and  the  public  are  losing confidence in their ability to keep prices stable in a moderate recovery with little  wage  growth.  “Many  participants  observed  the  committee  should remain  attentive  to  evidence  of  a  possible  downward  shift  in  longer-term inflation expectations,” according to the Oct. 28-29 FOMC minutes.

Kocherlakota says low inflation risks Fed credibility

Federal  Reserve  Bank  of  Minneapolis  President  Narayana  Kocherlakota said a widening gap between low inflation and the Fed’s 2% target for price gains may endanger the central bank’s credibility on meeting its mandate. Fed  credibility  is  crucial  to  avoiding  this  trap,  because  well-anchored inflation  expectations  “are  the  heart  of  what  makes  monetary  policy effective at combating adverse shocks,” he said.

Fed researchers see oil curb on inflation offset by other prices

Federal  Reserve  Bank  of  Cleveland  researchers  say  falling  oil  prices mostly  affect  inflation  through  retail  gasoline  costs  and  producer  prices, which  means  savings  at  the  gas  pump  can  help  lift  prices  for  other products.  “As consumers  use savings from  lower  energy  prices for  other goods and services, these prices are likely to rise in response, offsetting the initial dis-inflationary impact of lower oil prices,” they said.

Single-family housing starts in US rise along with permits

Groundbreaking  for  single-family  homes  climbed  in  October  and  permits for all future projects reached a six-year high to signal construction will add to  US  economic  growth  in  early  2015.  Starts  of  one-family  houses advanced  4.2%  to  a  696,000  annualized  rate  in  October,  Commerce Department said.  However,  total starts  was  down 2.8%  to a 1.01m  pace (1.04m in September), below the median estimate of 1.03m rate.

Carney’s majority shows cracks on inflation concerns

Bank  of  England  policy  makers  in  its  Nov.  5-6  meeting  showed  the  7-2 voted  to keep the  key  interest rate at a record low  of 0.5% had a “material spread of views on the balance of risks.” While some of those views were focused on the possibility of weaker growth, others cited the potential for a faster decline in excess capacity in the economy, boosting inflation.

Kuroda wins wider majority, says inflation may dip below 1%

Bank of Japan (BOJ)  Governor Haruhiko Kuroda secured a wider majority and  warned  inflation  could  fall  below  1%  after  the  world’s  third-largest economy  slid  into  recession.  The  BOJ  board  voted  8-1  to  continue expanding  the  monetary  base  at  an  annual  pace  of  ¥80trn  (US$683bn), following a split decision to boost stimulus in October.

Crude declines as investors weigh likelihood of OPEC out

Brent oil declined amid investor speculation about the likelihood of OPEC making a production cut next week.  Brent for January settlement dropped US$0.37 cents (0.5%) to US$78.10 a barrel.

Source: Bloomberg