How hawkish are you Ben?

Today is the day Fed Reserve's Chairman Ben Bernanke needs to "talk and sound" like a hawk; some may agree that he has turned into one already. Why you may ask? Well, with the likelihood that US interest rate to remain unchanged in today's FOMC meeting, there is a strong possibility the USD will be weaken further in the coming months. As Bernanke could not raise interest rate at this juncture, the best he could do is to talk hawkish in the near term in the eyes of the market players...and they say talk is cheap. This is important due to the fact that European Central Bank(ECB) has been "perceived" to be raising its interest rate in July and if the US interest rate stays unchanged or not being "forward hawkish" it will results USD being sold down in favour of the high yielding Euro. A weak USD will results a more severe rise of oil and commodities prices in the coming months. It will make Bernanke job really tough fighting inflation while saving a faltering economy which has not shown signs of improvement yet.

Bernanke has for the passed 8 months or so reduced interest rate from 5.25% to 2% now. In doing so, his main objective was to avert a banking crisis (caused by the property bubble and subprime loans crisis). Although a major financial crisis may have been avoided, Bernanke has now to deal with the high inflation(and also growing unemployment) and an a weak economy. Further, inflation expectation seems to have risen further now. Rising costs will eat into company's profit margin and as it does, cost cutting measures will be on the way including retrenchment of workers etc.

There seems to be pressure to increase interest rate soon to fight inflation but when? The answer is ASAP but can the still weak economies take it? In order to raise interest by August(next FOMC meeting), the US economy needs to be in a better footing by then and as such economic data for the next 2 months would be crucial for a hunch whether interest rate will rise again. Further, Bernanke would certainly hope that ECB would wait at least till August before raising its interest rate. A good understanding between the two central banks is crucial so that the economic recovery in the US is on track. I guess however, ECB would get plenty of criticism and wrath from the European countries if it does that for siding the US instead of its own countries. It will be good if ECB or Fed could coordinate their policies together to fight inflation, otherwise our world economy will have to face further major inflationary, growth and unemployment issues then. Currently, Eurozone's interest rate and inflation rate for May are 4% and 3.7% respectively, while the US are 2% and 4.2% respectively.

* The above is TopCat. According to our Finance Minister Yakcop, despite at rise of 78sen in petrol price recently, the actual increase for the poor is only 23 sen due to the RM625 rebate offered. Care to work out the details Mr TopCat? How do you classify poor; is a motorcycle owner considered poor and a car owner is rich, do you mean a person who does not travel a lot using a vehicle etc is considered poor? Have you actually considered the impact of rise in petrol/diesel on our food and energy prices? Is our oil exporting Government trying to fast forward recession in our economy by raising gasoline prices due to the "mistakes" of its past?

* TheStar: The May 2 Cyclone Nargis in Myanmar has to date claimed more than 138,000 lives. As a comparison, the May 12 Sichuan earthquake in China has to date claimed more than 80,000 lives.

* What do both PM of Thailand and South Korea have in common? Both are under tremendous siege at the forth month as a PM. Our PM, Badawi although not new, will be entering his 4th month too as a PM for his second term this coming July....will he has the same fate too??

* Walter Kwok of SHKP says that he has made an effort to mend his relationship with his family by putting recent events down as misunderstandings.

* Investors/Consumers confidence in the UK, Germany, Japan, South Korea, Singapore and the US are already falling to their lowest levels as spiralling food and energy costs sapped people's spending power. Also we have witness the following countries raising their interest rates to fight inflation including countries in Mexico, India, HK (on mortgage rate) and Australia.