(March 16 – 11:15 ET) – This morning’s economic reports from the United States leave economists as confused as ever heading into next week’s decision on U.S. interest rates.

Economists have yet to agree on what the U.S. Federal Reserve Board will do next week. It’s assumed that a 50 basis point rate cut is baked in the cake, but 75 bps remains a possibility. Today’s data has yet to clarify the situation.

The 0.1% increase to the U.S. Producer Price in February was milder than expected. The core rate, the more important number, fell a very sharp 0.3%. The slide came as light truck prices plunged 3.6% and car prices slid 1.5%. Computer prices also fell 1.1%.

The conclusion from these numbers is that inflation is not an issue, and the Fed can go ahead with a 75 bps cut. “The good inflation report clears a hurdle for an aggressive Fed easing step,” says BMO Nesbitt Burns, without committing to an actual call on the Fed’s move.

On the heels of the PPI, U.S. housing starts were reported more or less unchanged in February, down just 0.4% in the month and in line with expectations. On an annualized basis, starts are up 18% over the past six months.

Housing starts remain strong, despite the apparent weakness in the economy. BMO warns that winter housing data are “infamous for their volatility so we will not read too much into this report”, but it notes that the data seems to confirm the view espoused by Fed chairman Alan Greenspan, “Consumer confidence is down but households are still spending on big-ticket items.” If this result continues, the Fed may be reluctant to go with a cut as big as 50 bps.