INFLATION

The Federal Reserve looks set to maintain its ultra-loose monetary policy on Tuesday as lofty oil prices and swooning stock markets after Japan's ravaging earthquake raised doubts about the economy's path.

Manufacturing in New York state rose in March to a nine-month high, while prices paid also accelerated in another sign inflation is starting to build.

What's your true level of risk today? No idea. But the least your fund manager, advisor or favorite financial columnist can do today is remember the lesson of 2007, and highlight the range of risks and possible fall-out which might lie ahead. Take inflation, for instance. Though small, the risk of currency devaluation and hyper-inflation in the developed West is still materially underpriced by gold bullion

The U.S. Federal Reserve is unlikely to tighten policy by either raising rates or halting the second edition of the asset purchase program known as QE2, when its policy board meets today, according to analysts.

Gold Bullion prices jumped at the start of Asian trade on Monday, gaining 1% against all major currencies as news broke that a third nuclear reactor north-east of Tokyo has gone into meltdown following last week's Japanese tsunami.

The Bank of Japan (BOJ) said on Monday it will increase the size of the asset purchase program from five trillion yen to 10 trillion yen and promised to inject additional liquidity into the financial system battered by the triple whammy of a disastrous earthquake, a tsunami and an unfolding nuclear crisis.

Earthquake in Japan. Unrest in the oil-producing Arab world. Sovereign-debt strains in Europe. Inflation in China.

Gold-buying prices held at two-week lows vs. the Dollar in London on Friday, as the US currency jumped and world stock markets sank after a powerful tsunami hits the Japanese coast 190 miles north-east of Tokyo.

Chinese inflation topped expectations in February at 4.9 percent and looks set to climb further in coming months, adding to pressure for another dose of monetary tightening.

Inflation in Germany rose more than previously estimated in February, strengthening speculation that the European Central Bank (ECB) may hike interest rate as early as next month.

The yuan plays only a secondary role among China's options to temper inflation, and monetary policy alone won't be enough to rein in prices, central bank governor Zhou Xiaochuan said on Friday.

Chinese inflation topped expectations, with prices rising 4.9 percent in the year to February and looking set to climb faster in coming months, adding to pressure for another dose of monetary tightening.

The Bank of England kept interest rates at a record low on Thursday, reluctant to jeopardize a fragile economic recovery and hopeful the recent surge in inflation will prove temporary.

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The Bank of England (BoE) on Thursday kept interest rates unchanged at 0.5 percent again, even though inflation remained above the central bank’s target of 2 percent for a fourteen consecutive month in January.

Official data showed on Thursday that China recorded a surprise trade deficit in February, causing Asian markets to drop on fears that monetary tightening in the country is taking a toll on economic growth.

The price of gold may touch $5,000 an ounce in the next 4 to 5 years, California-based Capital Gold Group Inc. says.

The European Central Bank's signal last week that it is ready to raise interest rates was quite necessary to tackle firming inflation pressures, ECB policymaker Axel Weber said on Tuesday.

Emerging market economies that powered the global recovery may be growing too fast for their own good as inflation pressures build, a top International Monetary Fund official said on Monday.

Recently, the US dollar has lost ground against most G10 currencies, including the euro, despite fears over the Middle East revolts.

Central banks worldwide are unified in seeking to anchor expectations for future inflation, but that does not mean they will all go about it in the same way, policymakers said Monday.