Market Report

Federal Reserve officials may be done cutting interest rates after voicing new inflation concerns and signaling they won't be surprised by further housing weakness.

Chairman Ben S. Bernanke and his colleagues cut the benchmark rate yesterday by a quarter point to 4.5 percent and said risks of higher prices and slower growth are "roughly" balanced. They warned that energy and commodity prices may place "renewed upward pressure on inflation."

A slowdown in the U.S. economy will shave up to 0.6 percent off euro-area economic growth next year, compelling the European Central Bank to hold interest rates, by contrast, the Bank of England will cut borrowing costs by 50 basis points next year.

VC

Sterling ticked up versus the Euro yesterday, supported by comments from a Bank of England policymaker suggesting that a near-term British interest rate cut is not a done deal. BoE Monetary Policy Committee member Kate Barker was quoted as saying that the question for British policymakers is whether things have changed so much in the economy since August that interest rates need to come down.

Signs of slowing housing market and trouble in the financial sector as a result of the August-September credit crunch have convinced economists that British rates have peaked, and the latest poll gives a median 30 percent chance of a growth-boosting rate cut as soon as next week.

No first tier British data is due on Today, but further clues on policymakers' thinking may come in a speech by David Blanch flower at 1800 GMT.

DH

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