Lantau International – ECB Rate Hike Looming

Lantau International ECB Rate Hike Looming

"Lantau International": Despite European Central Bank President Jean Claude Trichet's decision to keep the Euro zone's benchmark interest rate at 1%, the wording of his statement has convinced markets that he will not be emulating the hand-wringing of Mervyn King, his counterpart at the Bank of England, if a rate hike is, indeed, deemed necessary to contain inflation within the bloc of 17 nations using the euro currency.

"More and more nations are being forced to rein in their ultra-accommodative monetary policies because of rising food and fuel prices attributable to both increased demand from emerging markets and the debasement of paper currencies," said a "Lantau International" economist.

A mere two words - "strong vigilance" used by Mr. Trichet resulted in a sharp surge in the euro's value against that of the US dollar. A 2.4% rate of inflation prompted the more hawkish tone from the ECB President. "This must be rather galling for the Bank of England which held rates steady even though the UK's inflation rate hit 4%," added the "Lantau International" economist.

The firm, nevertheless, reminded clients that a resolution to euro zone debt crisis remains unlikely as long as Germany insists on protecting its taxpayers from having to bailouts of peripheral EU member states.

Gold has reached $1430 an ounce on safe-haven buying as investors expect the turmoil to continue but some commentators attribute its gains to the uprisings reasoning that if the governments of Tunisia, Egypt and now Libya had not come under pressure, gold would be less expensive than it is now.

"That's nonsense on so many levels," said Mirek Nemacek, Senior Vice President at "Lantau International". "Those governments came under pressure because the quantitative easing policies of the Fed and other central banks have made paper money worth less so people need more paper in order to buy food and pay for services. With many Mideast countries suffering just as much if not more than the West during the recession, many have no jobs and little money and this has been a major driver of the unrest."

A mere two words - "strong vigilance" used by Mr. Trichet resulted in a sharp surge in the euro's value against that of the US dollar. A 2.4% rate of inflation prompted the more hawkish tone from the ECB President. "This must be rather galling for the Bank of England which held rates steady even though the UK's inflation rate hit 4%," added the "Lantau International" economist.

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