Greenspan spoke today acting as though none of this mess is any of his doing. He's slime.
Economy Is Resilient but Wounds Linger
Tue Jul 16,10:24 AM ET
By Joanne Morrison
WASHINGTON (Reuters) - Federal Reserve ( news - web sites) Chairman Alan Greenspan ( news - web sites) on Tuesday lauded the U.S. economy's resilience but said wounds from corporate scandals and a stock rout will take time to heal, signaling that interest rates will stay at four-decade lows for now.
"While the economy has held up remarkably well, not surprisingly the depressing effects of recent events linger," Greenspan said in prepared congressional testimony, citing not just the stock market slide, but also the Sept. 11 attacks and last year's recession.
His cautious tone accelerated equity market losses, with the Dow Jones industrial average falling 195 points, or more than 2.2 percent, to 8,443 in the early minutes after his testimony was released. The blue-chip index had been trading at around 8,530 after logging moderate early morning declines.
In his twice-yearly monetary policy testimony to Congress, the Fed chief said mild inflation had given the Fed leeway to keep U.S. interest rates at the current 40-year low of 1.75 percent and added that the central bank had decided to maintain that easy stance until the economy is out of the woods.
"We have chosen to maintain that (accommodative) stance pending evidence that the forces inhibiting economic growth are dissipating enough to allow the strong fundamentals to show through more fully," Greenspan said.
Greenspan said while consumer spending has performed well, business spending could be hindered by a string of corporate scandals as "chastened CEOs" restate their company earnings.
The firestorm of controversy surrounding misdeeds at Enron and WorldCom have helped drive down major stock indices to five-year lows and Greenspan noted that many firms have turned understandably cautious in the current environment.
He said the ingredients were in place for improvement in business investment but warned: "A recovery in this category of spending is likely to be gradual by historical standards and uneven across sectors."
The Fed chief also highlighted a potential risk to the key consumer sector in the fallout from the scandals in the stock market.
"Spending will continue to adjust for some time to the declines that have occurred in equity prices," Greenspan said. |
