Global

· OECD Urges More Reforms Despite Improving Growth Prospects. Governments cannot rely solely on low inflation and easy monetary policy to consolidate recovery and boost employment even though growth prospects are improving in the world's largest economies, the Paris-based OECD said on Wednesday. Growth remained too low to "repair and activate labour markets", it said, noting that "abnormally low inflation and interest rates create a growing risk of financial instability with risk-taking and leverage driven by liquidity rather than fundamentals". Central banks would continue to drive recovery but the OECD warned against an exclusive reliance on monetary policy. "A more balanced approach to policy is required with fiscal and, especially, structural policies providing synergistic support to monetary policy," the think tank said. In a regular overview of the world economy, it confirmed its forecast of 3.1% growth in the U.S. economy this year and 3.0% next, with forecasts for India, the euro zone and Japan raised the most. Japan's growth forecast rose to 1.0% this year and 1.4% next, up 0.2 points and 0.4% respectively. For India, the OECD boosted its forecast significantly to 7.7% GDP growth in 2015, 1.3 percentage points higher than it was previously flagging, while for China it trimmed its forecast by 0.1 points to 7.0% in 2015. It raised its euro zone growth forecast to 1.4% this year and 2.0% in 2016, in both cases up 0.3 points on its last forecast made in November 2014, thanks to an acceleration of activity in the zone's largest economy, Germany. (Reuters)

Malaysia

· Fitch Sees More Than 50% Odds of Malaysia Downgrade on 1MDB. Malaysia’s credit rating is “more than 50% likely” to be downgraded as its trade balance worsens and a state investment company struggles to meets its debt obligations, Fitch Ratings said. The Southeast Asian nation would “sit more naturally in the BBB range,” Andrew Colquhoun, head of Asia Pacific sovereign ratings, said in an interview in Singapore Wednesday. Malaysia is rated A- by Fitch, one level above the lowest three bands of the investment grade ranging from BBB+ to BBB-. The ringgit erased gains. A deteriorating currentaccount surplus exposes Malaysia to volatility in investor sentiment, and Fitch will review the country next quarter, Colquhoun said. Developments surrounding 1Malaysia Development Bhd., whose advisory board is headed by Prime Minister Najib Razak, and which has been forced to dismantle its assets amid surging debts, is a “country demonstration of what weaker governance means,” he said. (Bloomberg)

Asia

· Asian Business Sentiment Steady In First Quarter As U.S. Rate Hike Fear Keeps Firms In Check. Concern over a U.S. interest rate hike kept sentiment in check at some of Asia's biggest firms, as optimism about the outlook for business over the next six months was near steady in the first quarter, a Thomson Reuters/INSEAD survey showed. The Thomson Reuters/INSEAD Asian Business Sentiment Index RACSI was 71 for the March quarter versus 72 three months earlier. A reading above 50 indicates an overall positive view. (Reuters)

· China February New Home Prices Fall at Fastest Rate on Record. China's average new home prices fell at the fastest pace on record in February from a year earlier, hurt by slower sales during the Lunar New Year holidays, but developers and analysts expected prices to slowly recover - particularly in top-tier cities. Average new home prices in China's 70 major cities dropped 5.7 percent last month from a year ago, the sixth consecutive fall, following January's 5.1 percent decline. It was the biggest annual decline in the nationwide survey since it began in 2011. (Reuters)

· China Says to Make Flexible Use of Monetary Policy Tools. China will pursue "active" fiscal policy and make "flexible" use of its monetary policy tools to keep its economy growing at a reasonable speed, the Chinese cabinet said on Wednesday. In its latest attempt to relieve concerns about China's cooling economy, the State Council said it would increase "targeted" adjustments to policies to support the labour market in the world's second-biggest economy. China's policymakers have characterised their recent moves, which include two interest rate cuts and one reduction in the reserve requirement ratio over four months, as "targeted" adjustments that do not represent a shift to looser policy. The central bank argues that the rate cuts keep real interest rates stable and do not mark a switch to an easing stance, even though that view is widely disputed by economists in the private sector. (Reuters)

· Indonesia Could Face $21 Billion Revenue Shortfall This Year - World Bank. Indonesia's 2015 revenue target is "really unrealistic" and there will be a large budget shortfall that could force the government to cut spending, a World Bank economist said on Wednesday. "Revenue shortfall is absolutely unavoidable," Ndiame Diop, the bank's lead economist for Indonesia, told a seminar titled "Indonesia Economic Quarterly: High Expectations". A World Bank report released at the event said this year's revenue shortfall could be as much as 282 trillion rupiah ($21.4 billion). A key impact of the shortfall, Diop said, is that "perhaps the government will have to revise its spending plan". (Reuters)

USA

· Fed Opens Door Wider for Rate Hike but Downgrades Economic Outlook. The Federal Reserve on Wednesday moved a step closer to hiking rates for the first time since 2006, but downgraded its economic growth and inflation projections, signalling it is in no rush to push borrowing costs to more normal levels. The U.S. central bank removed a reference to being "patient" on rates from its policy statement, opening the door wider for a hike in the next couple of months while sounding a cautious note on the health of the economic recovery. Fed officials also slashed their median estimate for the federal funds rate - the key overnight lending rate - to 0.625% for the end of 2015 from the 1.125% estimate in December. The cut to the so-called "dot plot," together with other economic concerns cited by the Fed, sent a more dovish message than investors were expecting, and pushed market bets on the central bank's rate "lift-off" from mid-year to the fall. "Just because we removed the word 'patient' from the statement doesn't mean we're going to be impatient," Fed Chair Janet Yellen said in a press conference after Wednesday's statement. (Reuters)

· U.S. Mortgage Applications Fall in Latest Week - MBA. Applications for U.S. home mortgages fell last week as both purchase and refinancing applications decreased, an industry group said on Wednesday. The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity, which includes both refinancing and home purchase demand, fell 3.9% in the week ended March 13. The MBA's seasonally adjusted index of refinancing applications fell 5.2%, while the gauge of loan requests for home purchases, a leading indicator of home sales, fell 1.5%. The refinance share of total mortgage activity fell to 59% of applications, the lowest level since October 2014, from 60% the week before. (Reuters)

Europe

· Britain Raises Official Growth Forecasts for 2015 and 2016. Britain raised its official growth forecasts slightly on Wednesday as finance minister George Osborne announced an annual budget statement. Growth for 2015 was forecast to be 2.5%, up from a forecast of 2.4% made in December, Osborne told parliament. Growth in 2016 is now expected to reach 2.3% compared with 2.2% in the December forecasts made by Britain's Office for Budget Responsibility. Osborne said the OBR believed growth would hold at 2.3% in 2017 and 2018 before rising to 2.4% in 2019. The Bank of England has predicted Britain's economy will grow 2.9% this year and in 2016, helped by the plunge in oil prices that is expected to boost consumption. The OBR also forecast the unemployment rate would fall to 5.3% this year, down from 5.7% in the three months to January, Osborne said. (Reuters)

· UK Earnings Growth Slows in January, Jobless Rate Stable. The pace of growth in British workers' pay slowed in January, hit by fewer bonus payments, while the percentage of people in work rose to an all-time high, official data showed on Wednesday. The data was published shortly before finance minister George Osborne announces his last budget before May 7's national election in a speech which is likely to focus on Britain's economic recovery including surging job creation. The Office for National Statistics also said Britain's unemployment rate was stable at 5.7%, matching its lowest level in almost seven years but above a forecast for another fall to 5.6% from economists. Total average weekly earnings, including bonuses, rose 1.1% in the month of January compared with the same month a year earlier, slowing from 2.4% growth in December. The ONS said there were signs that companies paid fewer bonuses in January than in December. Excluding bonuses, pay rose by an annual 1.6% in the month of January, unchanged from December. (Reuters)

· German Cabinet Approves Plans to Boost Mid-Term Spending. The German cabinet on Wednesday approved plans to boost spending by 15 billion euros ($15.9 billion) over the coming four years with extra cash going to infrastructure, foreign aid and defence. The government met its goal of a balanced budget, known as the "schwarze null" (black zero) one year early in 2014, and has come under international pressure to boost spending to help stimulate economic growth across Europe. As part of a supplementary 2015 budget, the government will give local communities some 3.5 billion euros from a new fund of "special assets" along with an added 1.5 billion euros in 2017. (Reuters)

Currencies

· Dollar in Vicious Reversal After Fed Stuns Bulls. The dollar nursed hefty losses on Thursday having suffered its biggest one-day fall in six years after the Federal Reserve struck a dovish tone on interest rates while highlighting the currency's drag on U.S. exports. The Fed not only downgraded its views on the economy and inflation but also lowered its interest rate trajectory, signaling a path to policy normalization that is far more gradual than some had expected. U.S. Treasury yields dived and Fed funds futures surged as a result. The dollar index skidded more than 2%, retreating from a 12-year peak set on Friday. The vicious dollar selloff dealt a severe blow to dollar bulls, and traders said strong U.S. data will now be needed for confidence to return. The euro bounced as high as $1.1062, well off a 12-year trough of $1.0457 plumbed a few days ago. It has since drifted back down to $1.0830. Against the yen, the greenback slid below USDJPY 120.00 for the first time in nearly three weeks, before recovering a bit of ground to last stand at 120.22. Commodity currencies were also sharply higher with the Aussie at $0.7745, not far from the overnight peak of $0.7846. It was well off a six-year trough of $0.7561 set earlier in the month. (Reuters)

Commodities · Oil Up Over 6% as Dollar Falls on Worry Of Slow U.S. Rate Hike. Oil prices jumped as much as 6% on Wednesday as the dollar fell after the Federal Reserve indicated it preferred a more gradual path to normalizing U.S. interest rates despite being open to the first rate hike in almost a decade. Benchmark Brent oil saw choppy moves earlier while U.S. crude prices fell after data pointing to the highest oil inventories in the United States in at least 80 years. Brent closed up $2.40, or 4.5%, at $55.91 a barrel. In post-settlement, it extended its gain to above $3, or 6%, reaching $56.84. U.S. crude finished up $1.20, or almost 3%, at $44.66 a barrel, and above $45 post-settlement. (Reuters)

· Gold Rallies After Fed Says Cautious on U.S. Economic Growth. Gold prices surged more than 2% on Wednesday, on track for the biggest rally since January after the Federal Reserve signaled a more cautious outlook for U.S. economic growth, and the dollar tumbled. Spot gold was up 1.8% at $1,168.70 an ounce at 3:35 p.m. EDT (1935 GMT), after surging 2.2% to $1,174.10 per ounce, the highest since March 9. Silver was up 2.6% at $15.92 an ounce, while palladium rose 1.8% to $774.72 an ounce and platinum climbed 2.1% to $1,115.20. (Reuters)