Threats of Inflation In the US

US consumer prices rose more than expected in January. Consumer prices rose 0.4%, matching the gain in December. Core consumer prices, excluding food and energy, rose 0.3%, after a 0.2% gain the prior month. The core rate was up 2.5% from January 2007, the biggest jump since March 2007. This inflation data indicates that prices are increasing in the US, and may pose a bigger problem after the Fed’s recent big-mac rate cut.

The US dollar took this as "positive" news that the Fed may have to halt tightening, and rebounded against the Euro, Swiss franc and British pound.

The Bank of England’s February meeting minutes showed officials voted 8-1 to lower its main interest rate to 5.25%, with David Blanchflower voting for a half-point cut in more than six years. Not good. GBP/USD is nearing 1.9385, a two-week low, and is looking bearish.

US housing starts rose 0.8% (1.4% expected) in January, to a seasonally adjusted 1.012 million annual rate, after plunging 14.8% in December to 1.004 million.

Meanwhile, there is talk that the Landesbanks are in crisis. Landesbanks, owned by Germany’s states, provide banking services for regional banks and support for states’ economic initiatives. That adds to the slowing of bullish momentum in the Euro.