Greenspan Sees No Inflation Pressures; Productivity Soars
WASHINGTON (Reuters) - Federal Reserve Chairman Alan Greenspan
said Tuesday the U.S. economy was continuing to expand in
exemplary fashion with no sign of inflation.
''Growth of output has remained vigorous, unemployment is lower
than it has been in nearly 30 years, and yet, despite the
tautness in labor markets, there have been no obvious signs of
emerging inflation pressures,'' Greenspan said in remarks
prepared for delivery to a conference sponsored by the Fed.
Greenspan's comments, reinforcing views that the Fed would not
need to raise interest rates, encouraged rallies already underway
in U.S. stock and bond markets after the release of government
productivity figures earlier Tuesday.
The U.S. central bank chief said he saw no indication that small
businesses were suffering a ''credit crunch'' that made it hard
for them to borrow and said technological innovation has been
expanding at a ''breathtaking'' pace.
''For the vast majority of small businesses, access to credit has
not been a top concern in this expansion, but many business
owners are quite anxious about the future as the familiar ways of
financing business undergo dramatic change,'' the Fed chief
noted.
Surveys of small businesses show the biggest problem in the
current long-running expansion has been finding workers to hire,
Greenspan noted.
He credited accelerating computer and telecommunications
technology with significantly boosting productivity, thus helping
to dampen inflation pressures.
Earlier Tuesday, the Labor Department said U.S. productivity grew
at the fastest rate in six years in the final quarter last year.
Productivity, which measures the amount of goods and services
that workers producer per hour, shot ahead by a revised 4.6
percent in the final three months of 1998 -- the most vigorous
since a 6.2 percent increase in the fourth quarter of 1992.
Greenspan noted that rising productivity is accompanied by higher
rates of return on capital equipment, which lowers the cost of
investing in new plant and equipment and encourages it.
At the same time, ''dramatically declining inflation
expectations'' were further helping to reduce borrowing costs by
lowering risk premiums, further fostering new investment in
production.
Greenspan also said a wave of big bank mergers did not seem to
threaten the supply of credit for small companies, partly because
when banks consolidate it encourages other institutions to step
up the pace of their lending to gain new customers.
He noted there was some concern that minority borrowers might be
turned down for loans more frequently than others and said it
merited more examination. Such discrimination, if it occurs, can
rob the economy of its growth potential by keeping worthy
customers from getting loans, Greenspan noted.
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