The U.S. economy needs months to recover from its slowdown, but the banking system remains sound despite a home mortgage crisis that could cause more problems, Treasury Secretary Henry Paulson said.

Federal Reserve can not wait until financial and housing markets stabilize before raising interest rates, Minneapolis Fed President Gary Stern said in an interview with Bloomberg on Friday.

The euro zone posted an unadjusted trade deficit much wider than expected in May as imports grew at more than double the rate of exports, data showed on Friday.

Euro zone economic growth is likely to be weak in the second and third quarters before staging a recovery, and second-round inflation effects need to be prevented, ECB President Jean-Claude Trichet said.

Bank of Japan Governor Masaaki Shirakawa said on Friday the central bank was putting equal focus on inflation and downside risks to the economy, reinforcing the view that interest rates will stay on hold at least for the rest of this year.

Factory activity in the U.S. Mid-Atlantic region shrank again in July, reflecting a weakening economy and the strain of rising costs.

The number of U.S. workers filing new claims for jobless benefits rose by a less-than-expected 18,000 last week to 366,000 on a seasonally adjusted basis, a Labor Department report showed on Thursday.

China's economy slowed in the second quarter under the weight of slower exports and a drive by the central bank to tighten credit, but inflationary pressures remained uncomfortably high, the government said on Thursday.

The global financial crisis is far from over—threatening to leave Federal Reserve interest rate policy on hold indefinitely.

U.S. Federal Reserve policy makers fretted at their most recent meeting that growing inflation risks may require an interest rate hike, but agreed that the outlook for both prices and growth was still too uncertain, minutes of the meeting showed.

Federal Reserve Chairman Ben Bernanke told a House panel Wednesday a top Fed priority is restoring financial calm even as "too high" inflation and weak growth threaten the economy.

US industrial production unexpectedly rebounded in June by 0.5 percent, its biggest jump in nearly a year, as utility and mining output soared and manufacturing reversed two months of declines, the Federal Reserve said on Wednesday.

Consumer prices in June rose by the biggest amount since 1982 on a continued surge in gasoline prices, adding more weight to an economy struggling through a strained banking system and a housing downturn.

Housing finance giants Fannie Mae and Freddie Mac have the potential to pose systemic risks to the financial system and need a stronger regulator, U.S. Treasury Secretary Henry Paulson said on Tuesday.