According to the Bank of England's inflation report on Wednesday, Governor Mervyn King could be required to write "a number of letters" to the Chancellor of the Ex-Chequer Alistair Darling, explaining why inflation rates are beyond the BOE's 3.0% upper bound. King said that higher inflation rates could persist for several quarters if the BOE continues cutting rates.

On Wednesday, the Office for National Statistics (ONS) announced that the unemployment rate remained unchanged at 5.2% in the first quarter of 2008, well in line with expectations. "The unemployment level was 1.61 million in the three months to March 2008, up 14,000 from the three months to December 2007 but down 83,000 from a year earlier," ONS elaborated in a press release.

ONS also reported that the claimant count rate for unemployment in the UK rose 2.5% to 806,300 in April, in line with expectations and unchanged from the previous month. Jobless claims had increased by 7,200 in March, up from the 3,600 rise seen in February. Economists had expected a flat reading.

February's reading was revised up from a drop of 1,200 jobless claims.

According to a statement released on Wednesday, the People's Bank of China (PBOC) has made inflation its top priority in a bid to battle rising prices and strengthen liquidity control. The PBOC said it will use interest rates "prudently" as consumer prices remain very high. The bank also said that Chinese economic growth has come down slightly this year, and is expected to experience a moderate slowdown in 2008.

The bank also said it was looking to increase currency flexibility and promote stability. Noting a decline in foreign exchange volatility surrounding the euro and yen, the PBOC said the Yuan had experienced increased two-way fluctuations in the first quarter. The PBOC also stated that the importance of the U.S. dollar in international reserves was weakening and the greenback's role as an international currency would weaken in the long term.

On Wednesday, Eurostat announced that industrial output in the euro zone fell 0.2% on a monthly basis in March. While this decrease is less than the 0.3% decline expected, it is noticeably lower than the 0.3% increase seen in February.

Annually, industrial output grew 2.0%, down from both the 2.3% growth rate expected and the 3.2% increase recorded in the previous month. February's rise was revised up from an initial reading of 3.1%.

Preliminary estimates from the National Institute of Statistics (INE) showed that the Spanish seasonally adjusted GDP quarterly growth rate slowed to 0.3% in the first quarter of 2008 following the previous quarter's increase of 0.8%. Economists had expected GDP to have risen 0.4%, quarter-over-quarter.

Spanish seasonally adjusted GDP also came in lower than expected on a yearly basis, showing a growth rate of 2.7%, down from both the expected 2.8% increase and the 3.5% rise seen in 2007's Q4.

According to data released by the National Institute for Statistics and Economic Studies (INSEE), French inflation rose 0.3% and 3.0% in April month-over-month and year-over-year, respectively. While the annualized CPI growth rate was expected, the consensus forecast had called for a monthly rise of 0.4%. March had seen the consumer price index rise 0.8% on a monthly basis, while CPI increased 3.2% annually.

Monthly and annual French HICP also came in at their respective growth rates of 0.4% and 3.4% in April, as expected. HICP in March had risen 0.8%. Annually, March's HICP grew 3.5%.

The National Statistics Institute (ISTAT) announced that Italian inflation rose 0.2% in April on a monthly basis, up from the preliminary estimate of 0.1%, but lower than March's record high 0.5% growth rate. Economists had not expected a change from the preliminary estimate. Annually, the consumer price index showed an expected increase of 3.3%, unchanged from the preliminary estimate and the previous month's reading.

The EU harmonized CPI rose 0.6% in April on a monthly basis, up from the 0.5% rise expected, but down from the 1.6% increase recorded in the prior month. Annualized HICP also rose higher than expected with a growth rate of 3.6%, up from the forecasted 3.5% rise, but unchanged from March's record high.

On Wednesday, Statistics Finland announced that inflation rose 0.1% month-over-month in April, as expected, following a 0.9% increase in March. Annually, Finnish CPI rose 3.5%, lower than the expected 3.8% growth rate and the previous month's 3.9% increase.

Speaking to reporters at the euro area finance ministers' meeting in Brussels on Wednesday, the European Commissioner for Economic and Financial Affairs Joaquin Almunia said that "we need to do more for inflation," reflecting the finance ministers' concern over current price rises.

However, Slovenian Finance Minister Andrej Bajuk expressed his satisfaction with the European Central Bank and said that he was "very happy" with the ECB's efforts concerning inflation fighting. Bajuk also stated that exchange rates should reflect economic fundamentals.

In a speech published on the Swedish central bank's website on Wednesday, Riksbank Deputy Governor Barbro Wickman-Parak said that she saw signs pointing to tensions in credit markets easing. "The credit spreads have declined and the cost of insuring against losses has fallen," Wickman-Parak elaborated. However, Wickman-Parak emphasized that, despite these positive signs, it was still too early to believe that the crisis was over.

Speaking to a conference in Singapore, former Fed Chairman Alan Greenspan said oil prices would continue rising due to constrained capacity. Greenspan also said the extent of the losses from subprime had not been discovered.

The U.S. economy should continue to expand at a sluggish pace with the drag from the housing sector easing over time, according to Chicago Fed President Charles Evans, speaking the ACCION Chicago's Annual Partnership Event in Chicago. His comments were similar to those made on Monday.

The Japanese domestic corporate goods price index in April rose 0.6%, above the consensus for a 0.5% increase and the previous month's 0.5% gain was revised up to a 0.6% increase. Annual corporate prices were up 3.7% in April, also above the forecasts for a 3.6% increase and below the previous month's 3.9% annual gain.

The Japanese current account beat expectations in March, growing to ¥2882.5 billion compared to the consensus ¥2810.0 billion level and the previous month's ¥2467.7 billion. The adjusted surplus was ¥2096.6 billion compared to the consensus for a ¥1959.7 billion level in March, and the previous ¥1461.1 billion was revised to ¥1466.7 billion. The trade balance also moved up to ¥1250.7 billion in March compared to forecasts for a ¥1233.0 billion level and the previous ¥1035.3 billion.

The Australian wage cost index moved up 0.9% quarter-over-quarter in Q1, below the consensus for a 1.1% increase and the previous quarter's 1.1% gain. On an annualized basis, the wage cost index rose 4.1%, below the consensus for a 4.3% gain and the previous 4.2% rise.

JN Loans & Discounts Corp (Annualized) March +0.1% vs. Prior: 0.0%

JN Domestic CGPI (Monthly) April +0.6% vs. Exp: +0.5% Revised: +0.6% Prior: +0.5%

JN Domestic CGPI (Annualized) April +3.7% vs. Exp: +3.6% Prior: +3.9%

JN Current Account Total March ¥2882.5B vs. Exp: ¥2810.0B Prior: ¥2467.7B

JN Adjusted Current Account Total March ¥2096.6B vs. Exp: ¥1959.7B Revised: ¥1466.7B Prior: ¥1461.1B

JN Trade Balance - BOP Basis March ¥1250.7B vs. Exp: ¥1233.0B Prior: ¥1035.3B

AU Wage Cost Index (Quarterly) 1Q +0.9% vs. Exp: +1.1% Prior: +1.1%

AU Wage Cost Index (Annualized) 1Q +4.1% vs. Exp: +4.3% Prior: +4.2%

EU France Consumer Price Index (Monthly) April +0.3% vs. Exp: +0.4% Prior: +0.8%

EU France Consumer Price Index (Annualized) April +3.0% vs. Exp: +3.0% Prior: +3.2%

EU France Consumer Price Index - EU Harmonised (Monthly) April +0.4% vs. Exp: +0.4% Prior: +0.8%

EU France Consumer Price Index - EU Harmonised (Annualized) April +3.4% vs. Exp: +3.4% Prior: +3.5%

EU France Consumer Price Index Ex Tobacco Index April 117.86 vs. Exp: 117.8 Prior: 117.46

EU Italy Consumer Price Index (NIC including tobacco) (Monthly) April Final +0.2% vs. Exp: +0.1% Prior: +0.1%

EU Italy Consumer Price Index (NIC including tobacco) (Annualized) April Final +3.3% vs. Exp: +3.3% Prior: +3.3%

EU Italy Consumer Price Index - EU Harmonized (Monthly) April Final +0.6% vs. Exp: +0.5% Prior: +0.5%

EU Italy Consumer Price Index - EU Harmonized (Annualized) April Final +3.6% vs. Exp: +3.5% Prior: +3.5%

UK Claimant Count Rate April +2.5% vs. Exp: 2.5% Prior: 2.5%

UK Jobless Claims Change April +7.2k vs. Exp: 0.0k Revised: +3.6Kk Prior: -1.2k

UK Avg Earnings inc bonus 3month/(Annualized) March +4.0% vs. Exp: +3.7% Prior: +3.7%

UK Avg Earnings ex bonus 3month/(Annualized) March +3.8% vs. Exp: +3.8% Prior: +3.8%

UK ILO Unemployment Rate (3 months) March +5.2% vs. Exp: +5.2% +5.2%

UK Manufacturing Unit Wage Cost (3months/(Annualized)) March +0.8% vs. Prior: +0.8%

EU Euro-Zone Industrial Production (SA) (Monthly) March -0.2% vs. Exp: -0.3% Prior: +0.3%

EU Euro-Zone Industrial Production (WDA) (Annualized) March +2.0% vs. Exp: +2.3% Revised: +3.2% Prior: +3.1%

By Erik Kevin Franco, This email address is being protected from spam bots, you need Javascript enabled to view it with contributions from Todd Wailoo, This email address is being protected from spam bots, you need Javascript enabled to view it and Steve Stecyk, This email address is being protected from spam bots, you need Javascript enabled to view it , edited by Cristina Markham, This email address is being protected from spam bots, you need Javascript enabled to view it