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| Greenspan Wary About Inflation | |
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| Tweet Topic Started: Nov 3 2005, 12:42 PM (93 Views) | |
| abuturab82 | Nov 3 2005, 12:42 PM Post #1 |
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Greenspan wary about inflation Fed chief says economy has momentum, but 'uncertainty' surrounds inflation outlook. November 3, 2005: 11:42 AM EST Fed Chairman Alan Greenspan Fed Chairman Alan Greenspan Time Warner Cable TV Order your Time Warner Cable TV online at ConnectMyCable.com. Compare packages... www.connectmycable.com Road Runner Time Warner Internet Get Road Runner: $29.95/mo for 6 months. Free installation. Time Warner Road... www.roadrunneroffers.com Time Warner at Shopping.com Find, compare and buy musical instruments and other electronics products. Read... www.shopping.com Time Warner Inc.: In-Depth Company Info Go to Hoover's for in-depth, first-hand, company coverage provided by business... www.hoovers.com WASHINGTON (Reuters) - The economy has good momentum despite some drag from the impact of recent hurricanes, Federal Reserve Chairman Alan Greenspan said Tuesday, but he warned that potential inflation was a concern. "Structural productivity continues to grow at a firm pace, and rebuilding activity following the hurricanes should boost real GDP growth for a while," Greenspan told the congressional Joint Economic Committee. "More uncertainty, however, surrounds the outlook for inflation." The 79-year old Fed chief, who steps down at the end of January, also warned the United States must take steps to boost its supplies of natural gas, though he said they seemed adequate for the moment. "However, a colder-than-average winter would stress this market, and prices will likely remain vulnerable to spikes until the spring," he said. In response to questions, he said consumers were likely to be "quite surprised" by the heating bills they receive this winter. Greenspan made no specific reference to monetary policy in his opening remarks but his warning about inflation echoed the concern that Federal Reserve policy-makers have cited in their current rate-rising campaign. Rates heading up The policy-setting Federal Open Market Committee boosted short-term interest rates for a 12th straight time on Tuesday, pushing the trend-setting federal funds rate to 4 percent, highest in more than four years. Financial markets took Greenspan's remarks calmly, considering them largely in line with past testimony rather than striking new themes. By mid-morning, bond prices were down modestly but stocks were enjoying a rally. "The economy is strong but they're worried about inflation, It sounds a lot like the FOMC statement," commented economist Stephen Stanley of Greenwich Capital markets in Greenwich, Conn. "There is no signal that the Fed is nearing the end (of its tightening cycle), and that's been the one consistent thing," Stanley noted. Most economists expect the Fed to keep raising rates at least throughout Greenspan's tenure, which includes two more FOMC meetings in December and January. Deficit peril Greenspan repeated a past warning that lawmakers must take action to get U.S. budget deficits under control but conceded it will be difficult when billions of dollars must be spent to rebuild the Gulf Coast after hurricanes Katrina and Rita. With retirement and health-care costs rising as the population ages, budget deficits could hit "an unsustainable trajectory" that pushes interest rates up and keeps debt-service costs rising as a proportion of total national output. "Unless the situation is reversed, at some point these budget trends will cause serious economic disruptions." It was one of Greenspan's final appearances before Congress -- one of dozens over the decades -- and members offered praise for his lengthy tenure. "You have guided monetary policy through stock market crashes, wars, terrorist attacks and natural disasters," JEC Chairman Jim Saxton said. "You have made a great contribution to the prosperity of the U.S. and the nation is in your debt." Greenspan was in charge of the nation's monetary policy while the longest economic expansion in history during the 1990s but has taken criticism from some lawmakers for his opaque methods of determining monetary-policy. President Bush has nominated Ben Bernanke, chairman of the White House's Council of Economic Advisers and a former Fed governor, to succeed Greenspan. The Senate Banking Committee is expected to hold a hearing on Bernanke's nomination sometime this month, though it remains unclear whether a final Senate vote will come this year or early in 2006. |
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2:08 PM Jul 11