· Concern over inflation is being fueled by today's releases of March inflation in Italy and France, both of which exceeded 3.5%.  The year to year rate of increase in the Harmonized Index of Consumer Prices in Italy rose 3.57% and, in France, 3.53%.  Inflation in March for Germany was released earlier and it was  3.2%.  Inflation rates for France, Italy and Germany are shown in the second chart, where the sharp run up in inflation since last September is apparent.

· Institutional investors and analysts in the ZEW survey are still relatively comfortable with the present economic conditions--the excess of optimists over pessimists rose slightly in April to 33.2%. They  have, however, become much more cautious about the next six months.  The excess of pessimists over optimists regarding the next six months rose from 32.0% to 40.7%.  This compares with the largest excess of pessimists of 62.2% in December, 1992.  The third chart shows percent balances for current and expected conditions since the beginning of the series.