Inflation in the euro-zone accelerated in May to a 3.7% annualized rate, as surging fuel, food, housing forced up costs across the 15-nation currency area, Eurostat, the European Union's economic statistics agency, announced Monday. (pdf)
Further, euro-zone inflation is now running at its highest rate since 1996. Inflation had increased at a 3.3% annualized rate in April, Eurostat said. Food prices and transportation prices, up 6.4% and 5.9%, respectively, in the past year, were major factors in inflation's rise.
Currency traders responded to the inflation news by bidding up the euro and short-circuiting - - at least for the time being - - a recovery in the dollar. The euro gained about 1 cent to $1.5483 versus the dollar in Monday afternoon trading.
Trans-Atlantic two-step
London-based economist Mark Chandler told BloggingStocks Monday the May euro-zone inflation data is another debating point for the inflation hawks on the European Central Bank. "Even before the latest data everyone had pretty much discounted that [ECG President Jean-Claude] Trichet wants and is going to get a rate increase. But now there's concern there may be more than one rate increase ahead. The currency markets certainly reflected that," Chandler said. "It's a bit premature to start talking about multiple rate hikes, in my view."
Further, Chandler said the euro-zone's most recent data on inflation will not go unnoticed by Chairman Ben Bernanke and the U.S Federal Reserve.
"Over the past two weeks you can see this shift in the debate from one concerned about liquidity and access to credit to inflation containment," Chandler said. "Both the ECB and Fed have gone on record now with what they believe are the limits to inflation and the most recent European inflation data fits there their thesis well. It's economic strength through lower inflation and lower commodity prices."
Entrepreneur's Journal: Want to get a piece of the Buffett/Goldman honeypot?
The week in preview: No turkey earnings from Tyson, Hormel, Cracker Barrel ...
Comfort Zone Investing: Intel is saying something ... can you hear it?
Reader Comments (Page 1 of 1)
6-16-2008 @ 6:01PM
william lindblad said...
Try China, they have more.
Try India, they have it too.
Pandemic.