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WASHINGTON: The US Federal Reserve opened a two-day meeting on Tuesday to consider new tools to tackle the worst economic crisis since the 1930s, amid more tentative indications of improving conditions.
Positive economic reports emerged from the United States and Germany, even as firms around the world announced more job cuts.
In Washington, the Federal Open Market Committee (FOMC), which began deliberations on Tuesday, was expected to leave unchanged its base lending rate at zero to 0.25 percent as it mulls further moves to tackle the credit crunch and economic slump.
With the traditional tool of interest rate policy now exhausted, the central bank is focused on extraordinary efforts to pump up credit to boost the economy.
It has already started buying up mortgage securities and corporate commercial paper, and is set to launch a new program to pump 200 billion dollars into consumer credit through the purchase of securities linked to auto, student and other types of loans.
Meanwhile the news flow brightened somewhat on data that US home construction starts and permits posted a surprise jump in February from 50-year lows.
Many analysts believe that there can be no wider recovery without the US housing sector first stabilising.
US home starts soared 22.2 percent to a seasonally adjusted annual rate of 583,000 units after seven months of decline, well above forecasts for 450,000.
Permits rose three percent to a seasonally adjusted annual rate of 547,000, again well above forecasts for 500,000.
Economist Brian Wesbury at First Trust Portfolios called the report "the first hint of a major turnaround in home building that will begin late this year and contribute substantially to the economy in 2010-11."
Meanwhile in Germany, Europe's biggest economy, the ZEW investor confidence indicator, closely watched for economic trends, rose 2.3 points to minus 3.5, its best level since July 2007.
"According to financial market experts, the economic slowdown is gradually phasing out. The bottom of the recession is likely to be reached this summer," ZEW president Wolfgang Franz said in a statement.
Many remained skeptical about the modest rebound indications.
"We still believe that housing starts and permits have further to fall because the outlook facing builders continues to deteriorate," said IHS Global Insight's Patrick Newport, citing double-digit falls in home prices, nearly all-time unsold home inventories and rising foreclosures.
Analysts were also reticent about the German figures.
"There is no reason to become overly enthusiastic," said Carsten Brzeski from ING Financial Markets.
"Things will still get worse before they become better for the German economy. The start in the New Year could have hardly been worse," he said, noting the "shocking collapse" of industrial production in January.
Analysts at Morgan Stanley downgraded their 2009 eurozone forecasts to a contraction of 3.3 percent rather than their previous 1.6 percent, reflecting a view that the worst is by no means over and will not be until 2010.
European Union Economic Affairs Commissioner Joaquin Almunia meanwhile warned of possible social unrest as the slump takes its toll on jobs.
"We cannot stand by and observe (rising) tensions everywhere," he insisted, adding that it would be necessary "to use all available means to help those who lose their jobs."
US heavy equipment maker Caterpillar said meanwhile it would eliminate 2,454 jobs, bringing to nearly 25,000 the number of layoffs the embattled company has announced so far this year.
Nokia, the world's leading mobile phone maker, said it planned to cut another 1,700 jobs worldwide as part of cost-cutting measures to offset falling handset prices and sales. - AFP/de
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