ECONOMICS THE WEEK IN VIEW: Fed report will show US in 'a sweet spot'
Sunday 23 February 1997
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
- 1 Al Pacino on suffering from depression: 'It can last and it's terrifying'
- 2 Half of young women unable to ‘locate vagina’ and 65% find it difficult to say the word
- 3 Saudis risk new Muslim division with proposal to move Mohamed’s tomb
- 4 A teacher speaks out: 'I'm effectively being forced out of a career that I wanted to love'
- 5 Mexican woman becomes world’s 'oldest person' at 127
Perez Hilton apologises for publishing Jennifer Lawrence naked photo leak
Victoria Justice on naked photo leak: 'Let me nip this in the bud right now – pun intended'
Jennifer Lawrence 'nude photo hacker' claims there are hundreds more celebrity images to be published
Saudis risk new Muslim division with proposal to move Mohamed’s tomb
Ariana Grande nude photos leak: Pictures are completely fake, say singer's representatives
Rotherham child sex abuse scandal: Labour Home Office to be probed over what Tony Blair's government knew - and when
What do immigrants really think of Britain? Polish immigrant's Reddit post goes viral
Ashya King: Parents of five-year-old boy refused permission to visit him in hospital and denied bail at Spanish court
With Douglas Carswell joining Ukip, my party has taken another giant step forward
When elitism grips the top of British society to this extent, there is only one answer: abolish private schools
Ukip Douglas Carswell defection: Tory MP jumps ship to join Nigel Farage
iJobs Money & Business
£60000 - £75000 per annum + BONUS + BENEFITS: Harrington Starr: Business Anal...
£40000 - £50000 per annum + benefits+bonus+package: Harrington Starr: SQL Impl...
£85000 per annum: Harrington Starr: Head of IT (Windows, Server, VMware, SAN, ...
£40000 - £50000 per annum: Harrington Starr: You will not be expected to hav...