San Francisco Federal Reserve Bank President Janet Yellen said Tuesday the current level of U.S. interest rates should boost the economy in the second half of 2008.

The U.S. economy will barely expand in the second quarter and the chances of it shrinking have risen, following sluggish growth early in the year, said a Philadelphia Federal Reserve survey released Tuesday.

ECB policymaker Christian Noyer said on Tuesday that an explosive mix of soaring commodity prices and "permissive" monetary policy in some countries with dollar pegs could trigger an inflationary spiral which would hurt poor nations most.

Retail sales weakened modestly in April, but outside the hard-pressed auto sector they showed more resiliency than anticipated.

U.S. Federal Reserve Chairman Ben Bernanke said the credit crisis is not over, even as his colleagues revealed growing concerns about inflation that could signal a pause in interest rate cuts.

Cleveland Federal Reserve Bank President Sandra Pianalto said on Tuesday that although core U.S. price measures were climbing faster than she wanted, Fed monetary policy was compatible with low inflation.

Soaring food and fuel bills pushed up Britain's inflation rate by its biggest amount in nearly six years, further denting expectations of interest rate cuts despite a slowing economy.

UK housing sentiment slumped to record lows in April, underscoring continued weakness in the sector and piling pressure on the Bank of England at a time when snowballing inflation could force it to keep interest rates on hold.  

The U.S. dollar rallied broadly Tuesday after a report on April retail sales beat forecasts and supported views that the Federal Reserve will probably stop cutting interest rates next month.

China's most devastating earthquake in three decades killed more than 12,000 people with the toll likely to soar after state media said on Tuesday nearly 19,000 were buried under rubble in one city alone.

JPMorgan Chase Chairman and Chief Executive Jamie Dimon Monday told bank investors that while the current credit market crunch may soon be over, the U.S. economy could still face a deep and extended recession

Chicago Federal Reserve Bank President Charles Evans said that U.S. interest rates are "accommodative" and at the right level given a weak growth outlook, but then indicated that the Fed could still be open to cutting rates further.

It's a busy week on the economic calendar, with the consumer price index, data on housing starts and the Philly Fed index all expected.

The dollar rose versus the Japanese yen and Swiss franc Monday as investors snapped up riskier assets such as stocks, encouraged by a dip in oil prices and unexpectedly strong earnings from HSBC.

A recent bear-market rally in Europe may be cut short next week, when stocks are likely to be dragged lower as investors balk at the rising price of oil and fears that the financial sector woes are not over, return to haunt the markets.