The European Central Bank and the Bank of England Thursday each kept their key, short-term interest rates the same, at 4% and 5%, respectively, the banks announced. Economists surveyed by Bloomberg News had expected both the ECB and BOE to maintain current interest rate levels.

In its previous meeting, the ECB had kept its benchmark interest the same at 4%; meanwhile, the BOE lowered its key rate by 25 basis points to 5% from 5.25% on 10 April 2008.

In contrast, the U.S. Federal Reserve has lowered its key, short-term interest rate five times, or by 325 basis points, to 2% from 5.25%, as it attempts to jump-start a U.S. economy dragged to near-stall levels by its worst housing slump in a generation.

Further, for at least the time being, the ECB and BOE do not appear to be concerned about the euro's and the pound's steady, two-year rise versus the dollar. The euro traded at $1.5383 and the pound at $1.9583 in Thursday morning trading; each is about 4% off its 2008 highs.

The U.S. economy expanded at an annual rate of 0.6% in Q4 2007, below the consensus estimate, as activity in construction and consumer spending declined, The U.S. Commerce Department announced Thursday, in a statement.

Economists surveyed by Bloomberg News had expected the economy to grow at a 0.7% annualized rate in Q4 2007. The economy grew at a 4.9% pace in Q3 2007, the Commerce Department said.

For 2007, the economy grew at its weakest pace in five years, with GDP increasing at an inflation-adjusted 2.2%. GDP increased 2.9% in 2006. In 2007 the nation's GDP totaled $13.84 trillion, not adjusted for inflation.

In Q4 2007, a stronger performance in trade offset sub-par performances in consumer spending, business investment, residential investment, and inventories.

The U.S. Labor Department announced Tuesday producer prices surged 1.0% in January 2008 on energy costs, well above the 0.3% consensus estimate.

Meanwhile, the core PPI rate, which excludes food and energy costs, increased 0.4%, also well above the 0.2% estimate.

The 1% January 2008 PPI increase follows a 0.3% increase in December 2007.

Economist Steve Affinito told BloggingStocks Tuesday the January PPI stat is going to make it very rough for the U.S. Federal Reserve to maintain low interest rates for a long period of time.

Fed won't be pleased

"Wow! This number is hot, really above what we expected," Affinito said. "This almost guarantees that the Fed will be raising interest rates in a year about as fast as they lowered them this year. We have accelerating inflation at the wholesale level, so expect the Fed to clamp down on these inflationary pressures at the first sign they believe the economy is growing."

Initial jobless claims fell to 348,000 to for the week ended February 9 -- above the 343,000 consensus estimate, the U.S. Labor Department announced Thursday. Claims for the previous week were revised up 1,000 to 357,000.

Also, the four-week moving average jumped 12,000 to 347,2500 -- the highest four-week average since September 2005. Economists view the four-week average as a better indicator of unemployment conditions as it smooths-out anomalies for strikes, holidays, or other idiosyncratic events.

The largest increases in initial claims for the week ending Jan. 26 were in Washington, +2,710; Pennsylvania, +2,387; Oregon, +2.373; and Florida, +2,041. The largest decreases were in California, -2,849; Michigan, -1,723; Maryland, -1,050; Iowa, -870; and Massachusetts, -690.

The number of continuing claims decreased by 9,000 to 2.761 million from a revised 2.770 million for the week ended February 2, the latest period for which figures were available.

Economic Analysis: Once again, a poor weekly statistic, one that continues to show a tepid employment conditions. Further the 4four-week moving average continues to rise and is now just 3,000 claims shy of the U.S. Federal Reserve's danger zone of 350,000. The U.S. Federal Reserve considers a four-week average above 350,000 a signal of soft labor market conditions. In addition, the high continuing claims, which measures the seasonally adjusted uninsured, of 2.761 million, also indicates a tepid job market. If jobless conditions continue to worsen, additional monetary and fiscal measures may be needed to stimulate the U.S. economy.

U.S. Federal Reserve Chairman Ben Bernanke's signal, in a speech Thursday, that more interest rate cuts are on the way, should not cause Congressional officials to be less lax regarding fiscal policy stimulus, economists and analysts told BloggingStocks Thursday.

"In light of recent changes in the outlook for and the risks to growth, additional policy easing may be necessary," Bernanke said in a speech before a business group in Washington. Bernanke added that, "We stand ready to take substantive additional action as needed to support growth and to provide adequate insurance against downside risks."