(COMTEX)     B: Greenspan: Economy Hits 'Soft Patch'
B: Greenspan: Economy Hits 'Soft Patch'
 
WASHINGTON, Nov 13, 2002 (AP Online via COMTEX) -- Federal Reserve Chairman
Alan Greenspan told Congress Wednesday the economy has proven "remarkably
resilient" over the past year but warned that shocks from falling stock prices
to worries about a war with Iraq are dimming growth prospects.
 
Greenspan said the Fed's decision last week to cut interest rates by a
larger-than-expected half point was the central bank's response to the growing
dangers and he repeated the Fed's view in its rate cut announcement that the
central bank believed the economy would be able to pull out of the current weak
period.
 
But Greenspan told the Joint Economic Committee there was no doubt that a number
of forces were holding back growth currently. He cited in particular the fallout
from revelations about corporate accounting scandals, the continued reluctance
of businesses to increase their investment spending and "heightened geopolitical
risks."
 
"Over the last few months, these forces have taken their toll on activity and
evidence has accumulated that the economy has hit a soft patch," Greenspan told
the panel.
 
Greenspan said all of these problems were creating uncertainty among consumers,
who have been the driving force in the current recovery, and among businesses.
 
"Households have become more cautious in their purchases, while business
spending has yet to show any substantial vigor," Greenspan said.
 
He said it was against this backdrop that the Fed's interest rate panel, the
Federal Open Market Committee, decided last week to cut its target for the
federal funds rate, the interest that banks charge on overnight loans, by a
half-point to 1.25 percent, the lowest level in 41 years.
 
Greenspan gave no hint in his prepared testimony about what the central bank
might do next, but private economists believe if the economy continues to
weaken, the central bank will cut rates again either at its next meeting in
December or at its first meeting of the new year in January.
 
 
By MARTIN CRUTSINGER
AP Economics Writer
 
 Copyright 2002 Associated Press, All rights reserved
 
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APO Priority=u
APO Category=1310
 
 KEYWORD:          WASHINGTON
 SUBJECT CODE:     1310
 
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