Alan Greenspan, the Federal Reserve chairman, said > today that the central bank's decision about whether to raise interest > rates again at its meeting next month would hinge in large part on > economic data released in coming weeks. > > Repeating a message he delivered to the Senate Banking Committee last > week, Mr. Greenspan told the House Banking Committee that higher rates > were starting to slow the economy and reduce the risk of inflation, an > analysis that has fed hope in financial markets that the Fed is finished > or nearly finished raising rates. > > But the Fed chairman said the extent of the slowdown remained unclear, and > he seemed to warn investors not to assume that the central bank's > policy-making Federal Open Market Committee would make no changes when it > meets on Aug. 22. > > Reports in the next few weeks on the unemployment rate, job creation, > compensation costs, the growth rate and inflation"will have a significant > effect upon what action the committee chooses to take," Mr. Greenspan > said. > > At the meeting in August, he said,"we will make a judgment as to whether > or not further action or no action is the more appropriate policy for the > purpose of creating a more balanced economy which has the capacity to > continue this quite extraordinary 112-month expansion." > > The Fed has raised its benchmark short-term Federal funds rate by 1.75 > percentage points in six steps since June 1999, to 6.5 percent, in an > effort to squelch inflation pressures before they take root in the > economy. > > Mr. Greenspan's comments came on a day in which two economic indicators > came in slightly stronger than analysts had expected. > > Existing-home sales increased 2.8 percent in June, to a seasonally > adjusted annual rate of 5.23 million. And the consumer confidence index > published by the Conference Board, a business research group, increased to > 141.7 in July, up from 139.2 in June, but still below the record level of > 144.7 in January and May. > > Asked about the consumer confidence numbers today, Mr. Greenspan said it > was"clear that consumer confidence remains quite high in this country, > and that despite the evidence of some slowing down in consumer buying, > we're not confronted with a buyers' strike by any remote sense of the > meaning." > > In his appearance before the House committee, Mr. Greenspan repeated the > prepared testimony he had delivered to the Senate panel last week, and > answered questions for nearly three hours. > > Asked about transcripts of Fed meetings in 1994 that portray him as eager > to bring stock prices down, Mr. Greenspan said he had subsequently decided > that monetary policy should not be aimed at Wall Street. > > > He said the rapidly increasing trade deficit was not an immediate threat > because foreigners were eager to get their hands on dollars to invest in > the United States, but he said that in the long run the issue was
>"probably the most difficult one" facing economic policy makers. >
>"At some point something has to give," Mr. Greenspan said, referring to > the trade and current account deficits and the dollar, which so far has > remained quite strong. >
>"We don't know whether it will be protracted over a very long period of > time, in which case the adjustments will occur in the normal manner > without any significance, or whether they'll occur more abruptly," he > said. > > Mr. Greenspan also had a series of spirited exchanges with Democrats on > the committee about whether the economy and globalization are leaving too > many people behind. > > The Fed chairman said that the booming economy had helped reverse a > decline in real incomes at the bottom of the economic ladder, and that > incomes had been growing since the mid-1990's. He said it was important to > recognize that globalization created economic dislocation, and to help > those who had lost jobs or otherwise suffered economically because of the > changes created by global markets, but that its benefits far outweighed > its drawbacks, especially for the United States. > > Challenged on whether the government should do more to help people adapt > to the rapid economic changes, Mr. Greenspan said job training programs > were often unsuccessful, and that the best solution was to create more > jobs. >
>"There is no substitute for getting people employed," he said."The most > important thing that we as a government can do to enhance the economic > capabilities of the lesser-skilled people in this country and the inner > cities is to keep this economic growth going." > > But Mr. Greenspan said there were always going to be some people out of > work by choice or as they change jobs. And he suggested that he does not > view the Federal Reserve or the government as capable of eradicating all > economic problems, even amid the nation's longest business expansion ever. > > > Asked by Representative Barbara Lee, a Democrat from California, what he > would say to people who cannot afford to buy a home because of the surge > in real estate prices and mortgage rates, Mr. Greenspan said the problem > was not easily resolved. >
>"I wish I could say to you I have a program which will either knock > $100,000 off every home or raise incomes by some specific amount," Mr. > Greenspan said. "The world is not the way we'd always like it to be."
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