THE WALL STREET JOURNAL: Europe's nearly $1 trillion rescue plan seems to have quieted the government debt storm for the time being. But another problem may be brewing as Britain and the euro countries tackle their still unresolved fiscal problems: rising inflation rates.
Economists at Credit Suisse and Morgan Stanley are starting to worry about a harmful jump in inflation despite an absence of strong warning signals in Europe's financial markets. The concern is that Europe's top central bankers, European Central Bank President Jean-Claude Trichet and Bank of England Gov. Mervyn King, aren't taking as aggressive a stance against inflation as once believed. That view is putting pressure on the U.K. pound and the euro while helping to spark record demand for gold, historically a haven for investors worried that their cash will lose value.
The euro dropped Thursday to $1.2570 against the dollar, close to a 14-month low, despite the European Union's €750 billion ($947.09 billion) rescue package for troubled euro-zone countries. The U.K. pound is trading at $1.4715 compared with $1.61 at the start of the year, while the price of gold hit a record of $1,243.10 an ounce this week. Currencies with healthier profiles, including the Swiss franc, the Norwegian krone and Swedish krona, are also enjoying gold-like interest, with the franc hitting records against the euro Thursday. >>> Neil Shah and Katie Martin | Friday, May 14, 2010
