ECONOMICS THE WEEK IN VIEW: Fed report will show US in 'a sweet spot'

US Federal Reserve Chairman Alan Greenspan's semi-annual report to Congress, known as the Humphrey Hawkins testimony, dominates the economic agenda this week.

In his testimony, scheduled for Wednesday and Thursday, Mr Greenspan will outline the Fed's views on growth and interest rates in the world's biggest economy.

Mr Greenspan's success so far in getting the economy to run at a healthy non-inflationary clip was confirmed once again last week by several economic reports, making it more likely that rates will be left unchanged in the near term.

US consumer prices barely budged in January, rising just 0.1 per cent on the month, while a drop in December exports helped widen the trade deficit to a record.

"We're in a sweet spot," said Scott Brown, an economist at Raymond James in Florida. "The economy is growing moderately with little sign of inflation."

The drop in exports, which may be the first indication that the strong dollar is hurting overseas trade, does raise the question whether authorities can allow the dollar's ascent to continue.

The benefits of a weak currency are becoming apparent in Germany, Europe's leading economy, where export-led demand looks set to finally kickstart a recovery.

Reports last week showed business confidence in west Germany rose to its highest level since June 1995, while the Bundesbank reported M3 money supply growth of 11.7 per cent, auguring stronger economic expansion.

The improvement in business confidence probably reflected greater hopes among exporters, economists said, after the mark fell to a 34-month low against the dollar last week.

The money supply growth was, however, higher than expected and confirmed the Bundesbank's stance that any further cuts in interest rates are not necessary and could threaten future inflation.

This week, four leading German states report their preliminary estimates for February price inflation. In addition, the forward-looking producer price index will be published, as well as import prices for January.

Import prices are likely to have jumped last month, reflecting the recent weakness of the mark. Investors expect a rise of around 0.5 per cent on the month.

In Southern Europe, Italy remains in the spotlight. The country reported positive inflation figures for February last week, with the annual rate falling to 2.2 per cent, the lowest level since 1969, from 2.6 per cent in January.

That's unlikely to help Prime minister Romano Prodi, however, as he tries to negotiate an early agreement with his coalition partners on the 1998 Budget - part of the effort to cut the budget deficit to qualify for the single currency.

If an accord can't be reached, Mr Prodi has promised the EU he will produce a "convergence plan" to demonstrate that the country is on track to qualify. Copyright: IOS & Bloomberg

Start your day with The Independent, sign up for daily news emails
News
people
News
John Rees-Evans is standing for Ukip in Cardiff South and Penarth
news
Arts and Entertainment
Bianca Miller and Katie Bulmer-Cooke are scrutinised by Lord Sugar's aide Nick Hewer on The Apprentice final
tvBut Bianca Miller has taken on board his comments over pricing
Life and Style
Approaching sale shopping in a smart way means that you’ll get the most out of your money
life + styleSales shopping tips and tricks from the experts
PROMOTED VIDEO
News
Elton John and David Furnish exchange marriage vows
peopleSinger posts pictures of nuptials throughout the day
News
in picturesWounded and mangy husky puppy rescued from dump
Sport
David Silva, Andy Carroll, Arsene Wenger and Radamel Falcao
football
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

SThree: Trainee Recruitment Consultant - LONDON

£20000 - £25000 per annum + OTE £40,000 + Car + Pension: SThree: SThree are a ...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £35K: SThree: We consistently strive to be the...

SThree: Graduate Recruitment Consultant

£20000 - £25000 per annum + OTE £35000: SThree: SThree are a global FTSE 250 b...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £35K - £45K: SThree: SThree Group have been we...

Day In a Page

Surrounded by high-rise flats is a little house filled with Lebanon’s history - clocks, rifles, frogmen’s uniforms and colonial helmets

Clocks, rifles, swords, frogmen’s uniforms

Surrounded by high-rise flats is a little house filled with Lebanon’s history
Return to Gaza: Four months on, the wounds left by Israel's bombardment have not yet healed

Four months after the bombardment, Gaza’s wounds are yet to heal

Kim Sengupta is reunited with a man whose plight mirrors the suffering of the Palestinian people
Gastric surgery: Is it really the answer to the UK's obesity epidemic?

Is gastric surgery really the answer to the UK's obesity epidemic?

Critics argue that it’s crazy to operate on healthy people just to stop them eating
Homeless Veterans appeal: Christmas charity auction Part 2 - now LIVE

Homeless Veterans appeal: Christmas charity auction

Bid on original art, or trips of a lifetime to Africa or the 'Corrie' set, and help Homeless Veterans
Pantomime rings the changes to welcome autistic theatre-goers

Autism-friendly theatre

Pantomime leads the pack in quest to welcome all
The week Hollywood got scared and had to grow up a bit

The week Hollywood got scared and had to grow up a bit

Sony suffered a chorus of disapproval after it withdrew 'The Interview', but it's not too late for it to take a stand, says Joan Smith
From Widow Twankey to Mother Goose, how do the men who play panto dames get themselves ready for the performance of a lifetime?

Panto dames: before and after

From Widow Twankey to Mother Goose, how do the men who play panto dames get themselves ready for the performance of a lifetime?
Thirties murder mystery novel is surprise runaway Christmas hit

Thirties murder mystery novel is surprise runaway Christmas hit

Booksellers say readers are turning away from dark modern thrillers and back to the golden age of crime writing
Anne-Marie Huby: 'Charities deserve the best,' says founder of JustGiving

Anne-Marie Huby: 'Charities deserve the best'

Ten million of us have used the JustGiving website to donate to good causes. Its co-founder says that being dynamic is as important as being kind
The botanist who hunts for giant trees at Kew Gardens

The man who hunts giants

A Kew Gardens botanist has found 25 new large tree species - and he's sure there are more out there
The 12 ways of Christmas: Spare a thought for those who will be working to keep others safe during the festive season

The 12 ways of Christmas

We speak to a dozen people who will be working to keep others safe, happy and healthy over the holidays
Birdwatching men have a lot in common with their feathered friends, new study shows

The male exhibits strange behaviour

A new study shows that birdwatching men have a lot in common with their feathered friends...
Diaries of Evelyn Waugh, Virginia Woolf and Noël Coward reveal how they coped with the December blues

Famous diaries: Christmas week in history

Noël Coward parties into the night, Alan Clark bemoans the cost of servants, Evelyn Waugh ponders his drinking…
From noble to narky, the fall of the open letter

From noble to narky, the fall of the open letter

The great tradition of St Paul and Zola reached its nadir with a hungry worker's rant to Russell Brand, says DJ Taylor
A Christmas ghost story by Alison Moore: A prodigal daughter has a breakthrough

A Christmas ghost story by Alison Moore

The story was published earlier this month in 'Poor Souls' Light: Seven Curious Tales'