The Reserve Bank of Australia is concerned that inflation will not return to the 2% - 3% target until 2010, according to its monetary policy statement released on Thursday evening. The RBA hiked its 2008 inflation forecast to 4% from 3.5% and cut its GDP forecast to 2.25% from 3.25%. Inflation is expected to continue well into the next two years amidst tight credit conditions and slowing global demand.

The euro continued its rebound following more hawkish-than-expected comments from European Central Bank President Jean-Claude Trichet on Thursday, reaching 1.5489 USD. The Canadian dollar is also higher against the greenback at 1.0096 USD and WTI crude oil rebounded from a new all-time high of $125.13.

According to results from the European Central Bank's Bank Lending Survey for April, banks reported a net tightening of corporate credit in the first quarter of 2008 compared to Q4 in 2007, as well as a tightening of credit standards for household loans and consumer credit. Demand for loans to households for house purchases also declined in the first quarter. However, net loan demands to consumers and households for other purposes remained essentially unchanged.

Following the release of the Bank Lending Survey , the Bundesbank stated that credit standards were not as restraining in Germany as in the euro zone as a whole. "All in all, the changes in the credit conditions of surveyed banks in Germany were again considerably less restrictive than in the euro region overall," the Bundesbank said. The Bundesbank also noted that credit standards for households and consumers were expected to loosen in the second quarter of 2008 while credit standards for loans to firms were forecast to rise.

On Friday, the Federal Statistics Office (Destatis) reported that German wholesale prices rose 0.6% in April on a monthly basis, up from the 0.5% increase expected by economists but lower than March's growth rate of 1.6%. Annually, wholesale prices rose 6.9%. Economists had forecast the growth rate to slow to 6.7% following March's 7.1% rise.

According to data from the National Institute for Statistics and Economic Studies (INSEE) published on Friday, French industrial output fell 0.8% month-over-month in March, following February's 0.5% rise. Economist had expected production to fall 0.4%. February's reading was revised up from a 0.3% increase.

Annually, industrial production rose 1.0%, lower than the 1.6% growth rate forecast by economists. The previous month had seen a 2.3% year-over-year rise in output, revised up from an initial reading of 2.0%.

INSEE also announced that French manufacturing production fell in March by 1.5%, following the previous month's rise of 0.5%. Economists had expected a less severe decline of 0.5%. February's rise was revised up from 0.3%. Year-over-year, manufacturing output increased 0.4%, significantly lower than the expected 1.7% growth rate and the previous month's 2.3% rise. February's reading was revised up from 1.9%.

According to data from Statistics Netherlands, Dutch industrial production shrank 1.9% month-over-month in March, down from the 0.3% increase seen in the previous month and significantly lower than the 0.2% drop expected. On an annual basis, industrial production declined 0.6%. Economists had been expecting a growth rate of 1.4% following February's 0.7% rise.

According to the provisional estimates from the Statistical Office of the Republic of Slovenia, industrial output fell on a monthly basis by 2.4% in March, following February's 4.5% rise. Year-over-year, industrial production rose 1.0%, down from the 7.5% jump seen in the previous month.

According to provisional data from the Central Statistics Office, Irish industrial output rose 9.1% month-over-month in seasonally adjusted terms in March. February had seen a decrease of 3.1%, revised down from a decline of 0.2%. Annually, March's industrial production rose 6.9% following the previous month's decline of 1.9%. February's reading was revised down from a 1.1% increase initially announced.

The number of UK mortgage possession claims, regarded as the first stage of the repossession process, rose 16% over the first quarter of 2008 in year-over-year terms, the country's Ministry of Justice (MOJ) said on Friday. Its figures state that there were 38,688 claims over the first quarter compared with 33,344 in the corresponding period of 2007. MOJ further said that 27,530 mortgage possession orders were made in the first three months of the year, 17% higher than in the first quarter of 2007 and 9% higher than in the fourth quarter of 2007.

The median UK pay settlement growth figure in the three months to the end of April rose by 3.8% from a 3.5% rate seen in the three months to the end of March, according to figures published on Friday by research firm Incomes Data Services (IDS). IDS said April was the busiest month of wage bargaining so far in 2008 and private sector pay awards were being reached at relatively high levels against the background of perceptively high inflation. Furthermore, good performance in some sectors of the UK economy had also enabled some companies to apply higher wage rises, it added.

The Norwegian producer price index rose 4.1% in April month-over-month, fed primarily by increases in the price of energy goods, Statistics Norway said in a press release on Friday. This jump in PPI is significantly higher than March's 0.4% rise, as well as the expected reading of 0.8%.Annually, Norwegian PPI rose 21.3%, again above both economists' expectations of 18.0% and the previous month's 18.5% increase.

According to data from Statistics Norway, the consumer price index decreased 0.1% in April. Economists had expected inflation to rise 0.2% following March's 0.1% growth rate. On the other hand, the press release also noted the prices of audio-visual equipment and clothing, which fell by 8.1% and 4.1% respectively, contributed to the slowing of yearly CPI growth. Monthly underlying CPI rose by the expected 0.3% in Norway, following March's 0.6% reading. Annually, underlying inflation increased 2.4%, above the expected reading of 2.3% and the previous month's 2.1% rise.

According to the Ministry of Finance in Tokyo, official reserve assets declined to $1003.8 billion in April from $1015.6 billion in March.

A preliminary look at the Japanese leading economic index showed a reading of 20.0% in March, in line with the consensus forecast and below February's 54.5% score. The coincident index declined from 70.0% in February to 33.3% as expected.

Global stocks are under pressure after AiG reported a first-quarter loss of $1.41 excluding items per share, for a total loss of $7.81 billion. The loss was the largest on record for the largest insurer in the United States, which plans to raise $12.5 billion in capital.

JN Official Reserve Assets April $1003.8B vs. Prior: $1015.6B

AU Reserve Bank Quarterly Monetary Policy Statement

JN Leading Economic Index March Preliminary 20.0% vs. Exp: 20.0% Prior: 54.5%

JN Coincident Index March Preliminary 33.3% vs. Exp: 33.3% Prior: 70.0%

EU German Wholesale Price Index (Annualized) April +6.9% vs. Exp: +6.7% Prior: +7.1%

EU German Wholesale Price Index (Monthly) April +0.6% vs. Exp: +0.5% Prior: +1.6%

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