Germans Confident in Economy Despite Weak Dollar | Business| Economy and finance news from a German perspective | DW | 26.03.2008
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Germans Confident in Economy Despite Weak Dollar

A jump in Germany's most significant economic index surprised financial experts. The weak dollar, high oil prices and the concerns of the European Central Bank were expected to bring confidence down.

Euro coin, dollar note

The euro has surpassed $1.57

European Central Bank President Jean-Claude Trichet on Wednesday, March 26, defended the ECB's refusal to cut interest rates, as the UK and the US have done, saying this was "necessary to ensure middle-term price stability." High inflation in the euro zone will continue for longer than expected, he said, as a result of "increases in food and energy prices."

"We're concerned about the excessive exchange rate fluctuations," said Trichet, calling for a "significant change of culture" and greater transparency in the financial system.

On Wednesday, the euro rose once again against the dollar, opening at $1.5729, over one cent more than the previous day.

A pleasant surprise

Jean-Claude Trichet

Trichet said not raising interest rates would help stabilize prices

Experts were all the more surprised when the monthly IFO index, released on Wednesday, revealed an increase in the country's economic confidence for the third time in a row.

The index, considered Germany's most significant barometer of market climate, surveys 7,000 companies about their current economic situation and their expectations for the next six months.

In the March report, the index rose in both of these areas, for a total score of 104.8 points over 104.1 in February. A drop of 0.7 points had been anticipated.

The confidence may lead to more jobs, but not necessarily to economic growth. The IFO economic research institute had in February revised its growth prediction for Germany this year from 1.8 to 1.6 percent.

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