The Feds are worried over rising inflation especially since growth seems rather sluggish in the United States, while the ECB hinted for a possible rate hike as soon as next month, while the BOE are yet to speak about their outlook but from today's PPI we can tell it won't be much different than that of the Feds or the ECB, as inflation expectations could limit the BOE's options against prospects of slowing growth!

The U.K producer price index rose in May to the highest level since records began back in 1986 as food and energy prices continued to soar, input prices rose 3.8% higher than the previous 2.4% rise, while compared with a year earlier input prices rose 27.9% from 23.3%, output prices rose double expectations to 1.6% in May from 1.4% back in April, while compared with a year earlier output prices rose 8.9% from the prior 7.5% rise.

Yet the problem was the core PPI output prices also rose heavily, in May core PPI rose 5.9% above the 4.8% expected and the previous 4.6% rise, while compared with a year earlier core prices rose 5.2% after rising 3.5% previously and higher than the 3.0% anticipated rise!

Germany on the other hand released their trade balance for April, the surplus rose to 18.7 billion from the previous 16.7 billion surplus and higher than the expected 15.6 billion, while the current account surplus shrunk in April to 14.5 billion from 17.2 billion and almost inline with the 14.7 billion expected.

The Euro continue to rise in April to hit a record high above the $1.60 mark yet Germany's exports continued to rise, this should support the ECB outlook of ongoing growth in the Euro area as well as strong growth from the 15-nation largest economy.

While the situation in the U.K seems rather more complicated, the BOE will find it very difficult to unearth the balance among downside risks to growth and upside risks to inflation, as the economy continues to slowdown severely while inflation doesn't seem to be easing especially after oil prices recorded yet another new all times high.

Rising inflation might prevent the BOE from cutting interest rates to help growth levels, combined with the ongoing slump in the U.K housing sector and what seems to be freezing credit markets, the picture looks very similar to that seen in the United States, and the BOE will be eventually forced into making a decision as to whether shift their policy towards taming inflation or towards promoting growth levels!