In Europe, Euro-Area trade flows are mostly steady with Yr/Yr growth rates in excess of 20%. The balance of trade had swung back into deficit three months ago and it remains there. Exports and imports each are losing a slight bit of momentum in their yr/yr growth rates, but that picture has not changed much. Shorter term horizons still show elevated and even accelerating rates of growth.

Europe is still growing solidly. It continues to be led by growth in Germany. It has a creeping conundrum about where to focus monetary policy as growth in the area is still uneven but inflation has begun to rise, especially in its fastest growing large economy, Germany.

Problems are somewhat worse in the UK which is not in the e-zone. The UK has been ignoring and treating as temporary its growing inflation overshoot. But a recent survey has found that inflation expectations in the UK are starting to rise. That development will rip the ability to be flexible right out of the BOE’s policy options.

This is a situation that the ECB will want to avoid. The BOE dilemma will undoubtedly play into the hands of the hawks on the ECB. Still this dilemma is not a topical issue for the moment as events in the Middle East, Libya especially, and ongoing disasters in Japan have shifted the global focus elsewhere and largely away from policy making. But this past week the G-7 has been empowered to step in and help Japan in its time of need by agreeing to stem disorderly exchange market developments with the yen.

Perhaps we are not too far removed from having economic policy come back into focus.