US listens for hint of restraint

ALAN Greenspan, chairman of the US Federal Reserve, appears on Capitol Hill on Wednesday to discuss the economy during a week full of corporate earnings and conflicting signs about economic momentum.

While inflation is creeping up and oil prices rising - potentially worrisome factors affecting Fed policy - the recovery in America is not yet entrenched or robust enough to warrant immediate monetary tightening, most economists believe.

Yet the Federal Reserve is often ahead of the curve, and may view the recent economic data in a different light. Investors will be listening closely for clues as to when the shift to monetary restraint will take place.

The situation in corporate America is likely to play a role in the timing of Fed policy changes, and this week begins the flood of first-quarter earnings that will provide a look at prospects from executives' viewpoint. Industry leaders Ford, GM, Microsoft, Merrill Lynch, Apple Computer, Intel and Delta Airlines all report first-quarter profits this week and provide guidance about the future.

The reports are expected to run from truly awful to moderately healthy. GM and Ford will highlight the swing, GM reporting a profit gain to $1.10 a share from 50 cents a year ago, while Ford will be in the red, with a loss of 15 cents a share compared with profits of 60 cents a year earlier.

In economic news, business inventories for February, which will be released today, are expected to fall by 0.1%, after a small rise of 0.2% the month before. On Tuesday, the consumer price index for March is expected to bounce up to 0.4%, with the core rate rising 0.2%, but the actual number may be higher given the unexpectedly sharp rise in the producer price index reported last week.

Data supplied by Thomson Global Markets.