The minor threat of major global deflation
However, when we get over the shock of topping the euro price league, the far more worrying prospect of global deflation faces us.
That's a situation where prices start to fall. While this might be very welcome news here, the underlying implication of such a development is the threat of global recession.
In Washington this week, Alan Greenspan, chairman of the US Federal Reserve, discussed the subject before the Joint Economic Committee in Congress.
The huge fear among analysts in the run-up to the session was that he might identify deflation as the new threat for the US economy, and not the timing of the economic recovery which everyone is desperately hoping will happen in the second half of 2003.
In his well-chosen words Mr Greenspan said the threat "even though minor, is sufficiently large that it requires close scrutiny and maybe, maybe, action."ok - HT
Action, from a US standpoint, would take the form of further cuts in interest rates. With those already at 1.25% in the world's largest economy, the Fed boss doesn't realistically have much room for manoeuvre.
The big question is whether another cut, even of 0.5%, would inspire a much-needed recovery.
He also insisted it was incongruous to suggest the Fed could "run out of monetary ammunition" to deal with any deflation problem.
Overall, the general view was that Mr Greenspan kept his cool and painted a benign scenario for the US in the months ahead, with a few important caveats underpinning his moderately optimistic view point.
He stressed it was too soon to make a "firm judgment" about the overall state of the economy.
This may sound like trying to have it both ways, but to be fair to Mr Greenspan, he would have been less than honest had he attempted to give a different perspective on the future.
His take on where the economy is heading was less pessimistic however than a recent International Monetary Fund assessment, which concluded that "a few months of negative headline CPI inflation cannot be ruled out." This is probably what the Fed boss was intimating through his own unique manipulation of the English language.
However, as the IMF observes, the deflation question is probably a bigger threat than Mr Greenspan cares to admit, at this delicate time for the global economy.
In Europe the deflation question is probably a bigger risk than it is in the US, for a number of reasons.
The National Institute of Economic and Social Research the British policy think-tank recently warned there was a strong chance the euro zone would go into recession if the euro hit $1.40.
Now that an exchange rate of $1.40 no longer looks outrageous, given the change of sentiment on the dollar, perhaps our focus ought to be more on the situation in Europe, rather than being pre-occupied with the US.
In the broader scheme of things it is critical for the authorities in the US and Europe to realise that deflation, if it takes hold, can be a serious killer of growth.
We need look no further than Japan to illustrate that.
While we might rejoice at the prospects of falling prices, the downside is a simultaneous decline in economic activity, with all that entails.
Austin Hughes, chief economist at IIB Bank, said in a recent commentary that the Fed has given very serious thought as to how it would counter deflation.
In other words, it is taking the prospect a lot more seriously than Mr Greenspan, who for strategic reasons played it down on Wednesday when he went before the committee.
The big fear now is that both the ECB and Mr Greenspan are far more worried than they pretend to be, and that there is serious trouble ahead.
One of the great difficulties is that neither the ECB nor the Fed have much left in the tank by way of interest rate cuts, given their record low levels.
If the US cuts again, as some suggest it will, the implications for further dollar weakness could be such that the euro zone will go into recession far quicker than the US economy.
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