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To: Johnny Canuck who wrote (44977)	9/12/2008 4:32:03 AM
From: Johnny Canuck	Read Replies (1) \| Respond to of 70770

Market Scan Two Tales Of European Inflation Javier Espinoza, 09.11.08, 12:55 PM ET LONDON - Inflation is a violent mugger, Ronald Reagan once said. But the thug has a different face depending on where you stand. Two drastic pictures of inflation emerged Thursday after news that British price increases are worrying consumers, while costs in Hungary are falling more than expected. Britons' expectations of inflation over the next year rose 4.4 % in August from 4.3 % in May, according to a Bank of England survey. Current perceptions of inflation surged to 5.4% in August from 4.9% in May, the highest since the survey began in Nov. 1999 and well above the latest reading of headline inflation, the central bank's quarterly survey also showed. "Soaring utility prices, like gas and electricity, are the main drivers of this sharp rise in perception," Howard Archer, chief UK economist at Global Insight in London, told Forbes.com. "Although oil and commodity prices have fallen, there is a six-month lag," he said. Archer also said that although inflation is expected to reach a peak of 5.0%, it will sharply back to 2.0% in the fourth quarter next year, provided oil prices, production costs and salaries remain low. "The U.K. is likely to suffer a mild recession, but rising unemployment should dilute the inflation effects," the analyst said. Meanwhile, in Hungary consumer prices fell more than expected in August, providing the country's central bank with an opportunity to ease monetary policy. Consumer price inflation slowed to 6.5% in August from 6.7% in July and came below analysts' forecast for 6.65% on falling food and car fuel prices. "Inflation is coming down faster than people might have thought; food and commodity prices have come down fast and currencies for Poland, the Czech Republic and Hungary are stronger," David Hauner, an emerging markets strategist with the Bank of America, told Forbes.com. But are the inflation situations of Hungary and Britain that dramatically different? "Yes and no," said Hauner. "The main reason Hungary's inflation has fallen sharper than expected is because it was very high a year ago," he said. "Inflation expectations have been rising in Eastern Europe but they are now stabilizing. And perceived inflation is based in many cases on the purchase of regular products, which are mainly food-related. So actual inflation is usually lower than what people perceive," the economist said. "The trend is for inflation to go down in the whole of Europe," he added. Since the beginning of 2008 inflation, has been a major concern for policymakers around the globe, as oil and other commodity prices reached record highs. (See "Europe Bit By Inflation Bug.")