Rikers Island, New York – Stabbings, beatings and brutal treatment from prison guards characterize this American prison. Filled primarily with offenders who are visible minorities, jailed on drug offenses, the prison is a hotbed of violence and aggression. In 2007, prisoner Charles Afflic was beaten senseless with a billy club by a prison official, who hit him repeatedly from behind: his injuries were so severe they necessitated brain surgery. 6 inmates committed suicide, hanging themselves with bedsheets in their cells, during the first six months of 2003 alone. Rikers has a reputation for its cruel treatment of mentally ill prisoners, who often turn to suicide in lieu of treatment and understanding.

On the other hand, the Bank insists that there is a compelling case for inflation falling back towards target from 2012. The VAT rises of the past two years have pushed up price growth in 2010 and 2011, while the global commodity price rally in the second half of 2010 has also led to higher goods prices in the UK. By 2012, the effect of VAT on prices will have dropped out of the annual rate of inflation, and there are now early signs of some stabilisation in global commodity markets.

The major surprise in the CPI numbers came from air transport, where prices increased by 29.0% m/m. As a result, travel services as a whole showed m/m inflation of 5.2%, compared to our forecast of 0.5%, contributing an additional 0.3pp to m/m inflation overall. Air fares are one of the most volatile components of the CPI (despite being included in the core measure), and the higher-than-expected increase in prices is likely to have been driven largely by the impact of the timing of Easter. The other area where prices increased significantly was alcoholic beverages and tobacco, where duty increases announced at the budget pushed prices up by 5.3% m/m. However, this was in line with our forecast.

We will publish an updated inflation forecast shortly. Our initial impression is that the upside surprise in today’s numbers is likely to be largely unwound in May, and as a result we would not anticipate significant changes to our forecast.

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Earnings momentum negative – commodities down, cost pressures up.
Earnings trends -10y show that consensus earnings have consistently
lagged commodity and share prices by 3-6 months and downgrades have
tended to call a bottom to performance. Recent trends suggest an earnings
trough in June/July and improved relative performance from Q311.
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Lagging indicator: YTD the sector spot PE has remained around 7.5x
showing the stocks are at least efficient in pricing in commodity movements.
Our focus remains on fundamentals; in H2 we expect rebounding IP
momentum and improved risk appetite to underpin metal prices and drive a
re-rating of the sector. Base metals have underperformed bulks significantly
YTD, we would expect some of this to reverse in H2 as visibility improves.

On early morning conference calls, Mr. Kengeter has told senior bankers that he was done with their complaints about pay. “You just don’t get it,” he told thousands of bankers on more than one recent call, according to bankers who were on the call.

Concerning Greece, euro area finance ministers evidently had a controversial and informal discussion. Eurogroup chair Juncker said that “if all the conditions [related to a quicker pace of asset sales and deeper spending cuts] were met, then we can discuss the question of ‘re-profiling’” (i.e. a ‘soft’, voluntary rescheduling of interest payments and/or maturity profiles). However, French FM Lagarde commented, “Restructuring, re-profiling: off the table”, while there were no briefings by German officials. Dutch FM de Jager commented that ministers had discussed “all kinds of topics, including restructuring, but in public we are very reluctant about discussing restructuring and debating restructuring”.

What was agreed (and as discussed in detail by us in Friday’s Global Economic Weekly) was that a final decision on Greece would only be made by the time the review report of the IMF mission is made available in June, with euro area heads of state making a final decision at the 24 June EU summit.

However, the second group of finance ministers reportedly still believes that there might be chance for Greece to sustain its debt service payments if new revenue-enhancing measures, expenditure cuts and privatization revenues were to be agreed and implemented. According to this group, Greece might still be able to return to international capital markets for funding in the course of the next year.

Crucially, a third proposal, namely to proceed with a financial top-up of the existing programme as soon as possible, seems not to have found any traction.