EMC’s Business Finance blog

Confidence among American consumers fell in May to the lowest level since 1992 as the two-year housing slump showed no sign of bottoming.

The Conference Board’s confidence index declined more than forecast to 57.2, the New York-based research group said today. The S&P/Case-Shiller home-price index dropped 14.4 percent in March from a year earlier, the most since the figures were first published in 2001. Separate figures from the Commerce Department showed sales of new homes were the second-lowest since 1991 in April.

The financial world’s courses begin, turn the right way again for shares.

Rising interest rates in the bond market signal a change in the assessment before the Federal Reserve’s policy meeting next week. Until recently, the general feeling on the market seemed to be that the central bank would lower its target to over inter-bank loans to 1.75% from 2.25% currently. Now, the thinking is that quarter-point cut could do, and that it may be the latest in a series which has been almost two years.

“What it means that the market is not so convinced that the economy falls apart, as they were a month ago,” said David Wyss, chief economist at Standard & Poor’s. “It also means that investors are not expecting the Fed to go so far - 25 basis points rather than 50″.

Friday is the consumer confidence survey confirmed the worst fears of investors, which the US Securities and Exchange quaking with worries over inflation and employment.

The Reuters / University of Michigan survey reported that its preliminary consumer confidence index fell to its lowest point in 26 years in early April. The index fell in April to 63.2 from 69.5 in March. Economists surveyed by Thomson Financial expected the index to decline to 68.0.

The report reads one-year inflation expectations jumped to 4.8% - the highest since a similar reading in October 1990 - from 4.3% in March. The index of expectations for personal finances fell to 97, the lowest level since April 1980, when he was 94, from 112 in March. The index of current personal finances fell to 87, the lowest since November 1982, when he was 85, from 93 in March.

The Bank of Japan kept interest rates on hold at the first meeting chaired by Masaaki Shirakawa amid concern the economy slid into recession.

Shirakawa, the House today as Governor, and his six colleagues on the left key lending rate at 0.5 percent, the central bank said in a statement in Tokyo. The decision was unanimous.

Shirakawa May want to gather more evidence before they decide whether the world’s second largest economy needs the first rate cut in seven years. The latest economic data were mixed, with export growth and the acceleration of inflation as corporate sentiment fell to a four-year low and production cooled.

Federal Reserve officials expect that the economy would shrink in the first half of the year, with some “ concerned about a long and sharp economic slowdown.”

“ Many participants believed some contraction of economic activity in the first half of 2008 appeared likely now,’’said the chairman of the Fed in 18 minutes of the March Federal Open Market Committee Meeting in Washington today.

Policymakers also little evidence that housing markets have a basement, have highlighted the minutes. Merchants increased bet that the Fed will continue its benchmark interest rate less than half a point, if policymakers respect 29-30 April, futures prices.

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