PRESS DIGEST - Financial Times - May 9

The Financial Times

IMF WARNS OF INFLATION THREAT TO WORLD'S ECONOMY

The International Monetary Fund has issued a stark warning that inflation has re-emerged as a significant threat to the world economy. The managing director of the IMF, John Lipsky, said: "Inflation concerns have resurfaced after years of quiescence (due to soaring energy and food prices)." The warning came as crude oil prices reached a record of almost 124 dollars a barrel, up 99 percent over the past 12 months. Lipsky said policy-makers must respond aggressively to any sign of rising inflation expectations "lest the impressive gains in global stability attained in recent years be sacrificed".

MIXED RESPONSE TO HOLDING INTEREST RATE

Industry groups hoping for a boost to the housing market were disappointed at the decision by the Bank of England to hold interest rates at five percent on Thursday. Other business leaders, however, accepted the need to keep inflation in check. The decision to hold interest rates signals that the Bank does not yet think the UK economy has slowed enough to bring inflation back to target in the medium term. The CBI said the decision was no surprise, since the economy was slowing but "well short of recession", while producers were having to pass on rises in energy and raw material costs.

PACKAGE AIMS TO HELP AVOID LOSS OF HOMES

In a sign of growing government alarm about the fallout from the housing slowdown, the government will announce on Friday a package of measures to bolster beleaguered home owners. Official figures are expected to show a sharp increase in repossessions as rising mortgage costs make it difficult for more people to hold on to their homes. Housing Minister Caroline Flint is to announce the expansion of free legal representation at county courts for those at risk of losing their homes and the Treasury will announce an extra nine million pounds for the Citizens Advice Bureau to provide specific debt advice. Also, Chancellor of the Exchequer Alistair Darling held talks on Thursday with the six big retail banks and urged them to provide better information and support to borrowers.

ROYAL MAIL POSTS LOSS FOR LETTERS SERVICE

A sharp drop last year in the number of items posted and the impact of competition from the private sector have caused the Royal Mail's [GBPO.UL] letters business to post a loss for the first time, with last year's profit of 27 million pounds turning into a loss of 100 million pounds. Royal Mail said the number of letters handled daily had fallen from 83 million to 80 million with increasing use of the Internet and text messages replacing conventional mail. Preliminary results for the year to March 30 were published two days early after an independent review by the government said competition in postal services posed a substantial threat to the stability of Royal Mail and the future of the universal service.