It’s too early to tell whether those figures represent
reactions to the Iraq war or an underlying problem in the economy,
Federal Reserve Chairman Alan Greenspan told members of Congress
last week. Greenspan said he still expects growth to accelerate,
without providing a specific forecast.
“My sense is that the chairman is of the mind that we are
going to have the recovery going forward and doesn’t want to act
too preemptively if it isn’t necessary,” said Eric Engen, a
resident scholar at the American Enterprise Institute and former
senior Fed economist. “He certainly didn’t give any indication
that he’s willing to back too far off his optimistic forecast.”
In a Bloomberg survey, 67 of 68 economists said the central
bankers will hold the benchmark overnight lending rate at its 41-
year low of 1.25 percent in their policy meeting tomorrow.
Greenspan told the House Financial Services Committee that
while the data don’t yet show it, the economy is poised expand at
a “noticeably better pace” later in the year.
“The consensus of economic forecasters is that a material
rebound in economic activity will develop in the second half of
this year, and certainly a number of elements should be working in
that direction,” the chairman said.
At the same time, Greenspan delivered two caveats. Business
spending must revive to elevate the pace of growth, he said, and
any further decline in prices that starts to erode business
profitability would be “an unwelcome development.”
Bloomberg News
