At its meeting today, the Australian Reserve Bank (RBA) Board decided to leave the cash rate unchanged at 7.25%. According to a statement made by RBA Governor Glenn Stevens, inflation in Australia has been high over the past year, with the CPI rising by a little over 4% and underlying measures at a similar pace. Price rises were widespread in an environment of limited capacity and earlier strong growth in demand. As a result of the Board's earlier decisions, additional rises in market interest rates and tougher credit standards for some borrowers, there has been a substantial tightening in financial conditions since the middle of last year. Conditions in international financial markets, though improved in recent weeks, also remain difficult. These factors are acting to restrain demand.

Given the opposing forces at work, considerable uncertainty remains about the outlook for demand and inflation. On balance, the Board's current assessment is that demand growth will remain moderate this year. The opinion of the RBA is that inflation is likely to remain relatively high in the short term, but it should decline over time provided demand evolves as expected. Should demand not slow as expected or should expectations of high ongoing inflation begin to affect wage and price setting, that outlook would need to be reviewed.

The Australian Bureau of Statistics (ABS) announced the Australian balance on goods and services in seasonally adjusted terms was a deficit of A$2,736 million in March 2008, a decrease of A$525 million, or 16%, on the revised deficit in February 2008. In the eight months to March 2008, A$1,647 million worth of goods and services were imported from Canada, with A$1,211m worth exported. By comparison, A$18,095 million were imported from the United States. Australia continues to import most goods and services from APEC nations, continuing the current trend. The same is true for Australian exports.

According to data from Eurostat, the euro zone producer price index rose 0.7% in March, well in line with economists' expectations and unchanged from the previous month's increase. March's reading was revised up from 0.6%. Annually, industrial producer prices, excluding construction, rose 5.7%, significantly higher than the 5.6% forecast by economists and the 5.4% rise observed in the previous month. March's figure was revised up from 5.3%.

The final estimate for April's euro zone services purchasing managers' index was released on Tuesday and came in at 52.0, slightly above the preliminary estimate and the expected reading of 51.8. March had recorded a services PMI reading of 51.6. The French services PMI, covering companies from IT to the transport sector, fell to 52.8 from March's reading of 57.3 and the April preliminary estimate and expected reading of 54.0. The final April reading is the lowest since August 2003. German services PMI came in at 54.9, up from the expected and preliminary estimate of 54.6, as well as March's figure of 51.8. The euro zone PMI composite was also announced on Tuesday and came in at 51.9; in line with expectations, unchanged from April's preliminary estimate and up from March's record low 51.8.

According to data from the National Institute of Statistcs (INE), Spanish industrial production contracted by 13.3% in March, down from the previous month's annual rise of 4.0%. February's figure was revised up from 3.9%. Adjusting for calendar effects, industrial production in Spain fell 2.6% in March on an annual basis. This contraction follows February's registered increase of 1.9%, which was upwardly revised from 1.8%. Economists had expected industrial production growth to slow to 0.1%. Also announced was the increase of 37,500 persons unemployed in Spain in April, up from the previous month's 14,400 decrease.

At the Asian Development Bank meeting in Madrid on Tuesday, European Central Bank Governing Council member Miguel Ángel Fernández Ordóñez expressed worry over rising food prices in emerging markets.

"Inflation is identified as the key economic challenge for emerging economies," Ordóñez said, adding that he did not see any sign of food prices moderating and that high food costs, as well as rising oil prices, were negatively effecting global economic growth.

Speaking to reporters at the Asian Development Bank meeting in Madrid on Tuesday, Spanish Minister of Economy and Finance Pedro Solbes said that the European Central Bank had little room to maneuver on prices. Emphasizing the upward pressure on inflation due to rising food prices, Solbes also acknowledged the difficulty in slowing inflation "as much as we want".

The UK's services PMI declined from 52.1 in March to 50.4 in April, beyond expectations for a 51.7 level.

Official foreign reserves of the UK's Treasury showed a pullback of $1,122 million in assets in April compared to March's $45 million pick-up.

Inflation in Switzerland reached 0.8% month-over-month for April, lower than the expected 0.9% but higher than the 0.3% rise observed in March, according to data from the Swiss Federal Statistics Office (OFS). The rise in inflation was primarily due to price increases in the clothing and shoes sector (+18.4%), the OFS said in a press release. Annually, the consumer price index rose 2.3%, down from both the expected 2.4% increase and the previous month's reading of 2.6%.

Fed Chairman Ben Bernanke said accelerating rates of foreclosures and delinquencies can have a significant impact on the economy and called for more to be done in order to prevent them. Speaking Monday night at the Columbia Business School's 32nd annual dinner, Bernanke said the rate of foreclosures will likely increase in 2008 and that traditional anti-foreclosure steps may not be working to prevent them. He also said sharp declines in home prices can have a negative impact on the overall economy. He said government-sponsored enterprises Fannie Mae and Freddie Mac should raise more capital and "could do more" to help ease the crisis. He also called for clear disclosures of home-loan modifications. Bernanke also said the best solution is sometimes a mortgage writedown. He did not comment on the outlook for interest rates.

On Tuesday, the Board of the National Bank of Romania decided to set its policy rate at 9.75%, up 25 basis points, starting May 7. According to a press release, the Board also decided to continue to firmly manage money market liquidity via open market operations and not change existing reserve requirement ratios on both Romanian and foreign currency-denominated liabilities of credit institutions. An inflation report is scheduled for release on May 8.

Citing persistent inflation in the region and promises to continue to rear in price growth, the Indonesian Central bank hiked its benchmark interest rate 25 bps to 8.25% on Tuesday.

Swiss bank UBS reported a first-quarter loss of 11.54 billion swiss francs on Tuesday morning, adding that it planned to cut 5,500 jobs.

Commodities continued to soar in the overnight with WTI crude oil bouncing off intraday highs of $120.77 per barrel and gold off the $881.30 mark.

AU Trade Balance March -A$2736M vs. Exp: -A$2900M Revised: -A$3261M Prior: -A$3289M

AU Exports (Monthly) March +4.4% vs. Revised: -4.0% Prior: -4.1%

AU Imports (Monthly) March +1.3% vs. Revised: +0.4% Prior: -0.2%

EU ECB's Ordonez speaks at ADB Meeting in Madrid

EU German PMI Services April Final 54.9 vs. Exp: 54.6 Prior: 54.6

EU PMI Services April Final 52.0 vs. Exp: 51.8 Prior: 51.8

EU PMI Composite April Final 51.9 vs. Exp: 51.9 Prior: 51.9

EU Bank of Spain's Malo de Molina speaks in Madrid

UK PMI Services April 50.7 vs. Exp: 51.7 Prior: 52.1

UK Official Reserves (Changes) April -$112M vs. Prior: $45M

EU Euro-Zone PPI (Monthly) March +0.6% vs. Exp: +0.7% Revised: +0.7% vs. Prior: +0.6%

EU Euro-Zone PPI (Annualized) March +5.7% vs. Exp: +5.6% Revised: +5.4% Prior: +5.3%

By Erik Kevin Franco, This email address is being protected from spam bots, you need Javascript enabled to view it with contributions from Tim Stackpool, This email address is being protected from spam bots, you need Javascript enabled to view it , Todd Wailoo, This email address is being protected from spam bots, you need Javascript enabled to view it , and Stephen Huebl, This email address is being protected from spam bots, you need Javascript enabled to view it , edited by Nancy Girgis, This email address is being protected from spam bots, you need Javascript enabled to view it