US CPI Increased 0.1% in March

US consumer prices rose 0.1% in March, the US department f Labor delivered today. The Consumer Price Index (CPI) rose 2.3% as compared to March 2009, signaling that the US economy is picking up strongly after the worst recession since World War II. The core index excluding fuel and food showed the same monthly reading signaling a 1.1% surging on yearly adjusted basis. The core CPI rate rose 1.1% from March 2009, after a 1.3% surge the previous month. The gain for the year to March turned out to be the smallest in last 6 years. The result was predicted by economists. 0.1% inflation remains within the frames forecast by the US government.

This spring such retailers as Home Depot and Wal Mart Stores offer a variety of discount programs encouraging retail sales.

CPI is a basic economic indicator measuringchange of retail prices for goods and services including food, clothes, fuel, transport, medical services etc.

Bernake to Testify on Exit Strategy

Today the Chairman of the US Federal Reserve Ben Bernanke in his testimony before the Congress emphasized that the US economy still needs low rates, however the FED may tighten policy if necessary to prevent increase in consumer prices. According to Ben Bernanke, the emergency measures will be lifted when the Federal Reserve System finds it necessary. Once the economy becomes strong enough, the Federal Reserve will act. The tools used by FED, will vary depending on how economy recovers.

Extremely low refinancing rate

“Economy still needs support of monetary policy, and work on further lifting of credit stimulus,” – added Bernanke. In terms of financial crisis the FED, US central bank, voted to lower its key interest rate to its record bottom of 0-0.25% in order to provide the necessary monetary conditions for sooner recovery of economy after it was hit by recession. The US federal funds rate remains at its historical low since December 2008.

Besides, Mr. Bernanke repeated that a hike in discount rate – an emergency credit rate – did not mean a broader tightening of credit to companies and households.

Forex rates

In the Forex market the USD fell on Bernanke testimony as EUR/USD currency pair edged higher to 1.3368 level.

Romano Prodi: Greece`s Crisis Has Bottomed Out

Romano Prodi, the former European Commission President during his interview told the reporters that Greece`s financial slump has already bottomed and there is no concern on further collapse of the European united currency system resulted from budget deficit in Greece. According to Mr. Prodi, the euro will strengthen in the Forex currency market as the other Euro-bloc countries avoid following the Greece`s way. The problem with shortfall of Greek budget deficit seems to be over now.

The deficit of budget of Greece already exerted a bad influence on the 16-nation economy as the euro tumbled to its lowest level in last 10 months.

Recently Greek officials announced they do not need cooperation with other European countries as Greece`s economy has enough strength to overcome a 12.7% budget deficit. The government decided to cut spending and to increase taxes. These plans were treated with hostility by working unions staging a series of strikes around the country.

Romano Prodi, who managed to cut Italy`s budget deficit from 7 percent to 2.7% when he was Italian Prime Minister believes that concerns over Greece debt will be subdued soon and euro will pare its losses versus other major Forex currencies.

Business confidence in Germany Declines on Intense Snow

Business confidence in Germany in February dropped for first time in 11 months.

The decline is explained by extremely cold weather this winter which resulted into closing of unfinished constructions constraining work in most construction sites. The index, which measures business climate in Germany, Europe`s first economy, in January slid to 95.2 from 95.8 in December. The lowest point in last 26 years was marked in March 2009 when German business confidence index dropped to 82.2.

After an economic pickup in the third quarter recovery in the first Europe`s economy halted in the fourth quarter of 2009 as unexpected snow and extremely low temperatures dampened construction making the companies stop hiring new employees. Nevertheless, increase in global demand encouraged German exporters who managed to trim its losses.

According to the Bundesbank, Germany`s central bank, the economy is expected to grow at 1.6 percent pace compared to 5 percent slump in 2009.

Yesterday die Spiegel reported that the Minister of Finance of Germany prepared a plan of bail out to Greece of about $20 bln. Germany in cooperation with other EU countries is expected to help Greece suffering from budget crisis.

Solution for Greece`s Budget Deficit Is Found

Today European leaders came to the agreement aiming to help resolve the problem of 13% budget deficit in Greece.

According to this agreement, Greek government will receive lending facilities. Thus, the financial crisis in this country may be avoided. The EU leaders pledged to take “determined” action to struggle against the worst crisis in 11-year history of Euro. Greece's attempts to cope with its exploding debt has added to worries that the country might default. The EU President Herman Van Rompuy said: “We fully support the efforts of the Greek government and their commitment to do whatever is necessary including adopting additional measures.”

In order to safeguard financial stability in the region the EU leaders pledged to bail out Greek economy as here the problem of one euro-zone country becomes the problem of all. This step is considered historic in last ten years since the single currency was introduced. Euro zone leaders had hoped to keep Greece off the summit agenda. But they had to include it as worsening market conditions showed that Athens's problems could spill over to other EU countries.

Next week, the Ministers of finance of the EU countries will gather to discuss issues over Spain and Portugal also suffering from high budget deficit and increasing unemployment.

The agenda including all major economic events can be found at Economic Calendar Page.

Planned Layoffs Drop to 2-Year Minimum

The official data on planned job cuts in the USA were announced today. The December figures show the US economic activity began rising.

In December employers declared 45,094 planned layoffs, the lowest reading since December 2007. This figure is 73 percent lower than the reading in December 2008 with its 166,348 layoffs, the official research showed. In the second half of 2009 the employers fired their workers 56 percent lower than in the first half. After the second quarter of 2009 the US economy saw signs of recovery and the situation on the job market improved.

National US unemployment, the key indiator showing the sate of economy, decreased to a seasonally adjusted 10% in November from the 26-year high of 10.2 percent in October. The rate had increased for 12 out of the previous 13 months before November 2009. Analysts expect the national rate to edge up to 10.1% when the US Labor Department releases its December jobs report this Friday.

US Unemployment Declines to 10%

According to the US Bureau of Labor Statistics, the US jobless rate dropped to 10 percent level in November from 10.2 percent in October. These figures show that the US job market is getting out recession, however, significant obstacles remain. In November employers fired 11,000 workers, far below prior expectations of 150,000, Bureau of Labor`s figures show. The strong improvement surprised analysts, mentioning that the US job market still remains weak, however, moves into right direction.

The highest degree of employed people was seen in business and professional services adding 86.000 jobs. Employment in healthcare and education showed signs of recovery, while construction and manufacturing industry delivered 27.000 and 41.000 monthly job losses correspondently. However, there are still over 15 mln people unemployed in the USA, this number is twice bigger than before the recession started in 2007.

President Barack Obama called this data “good news” and promised to continue carrying out his programs aiming at hiring people.

After the official report the US Dollar spectacularly appreciated versus other Forex currencies.