Thursday June 3 12:52 AM ET Greenspan Mum On Rates, Warns On Trade
Full Coverage Alan Greenspan and the Federal Reserve
From: reuters.com
BOSTON (Reuters) - Federal Reserve Chairman Alan Greenspan Wednesday steered clear of commenting on the outlook for U.S. interest rates, instead repeating his concern over waning U.S. support for free world trade.
In a speech to business leaders in Boston, Greenspan lashed out against a rising tide of protectionism in the United States and criticized the Clinton administration's trade policy as being too confrontational.
But the speech gave no hints for financial markets, which were eagerly awaiting any indication on the future course of interest rates. Recent reports depicting an economy in danger of overheating have raised speculation the Fed will raise borrowing costs soon, and Greenspan did nothing to convince world markets otherwise.
''The United States has been in the forefront of the postwar opening up of international markets, much to our, and the rest of the world's, benefit,'' Greenspan said. ''It would be a great tragedy were that process reversed.''
His remarks largely mirrored a speech the Fed chairman gave in Dallas in mid-April.
The U.S. dollar firmed marginally against other key currencies in reaction to Greenspan's speech. The prospect of higher U.S. interest rates tends to benefit the U.S. dollar since they would make dollar-denominated assets more attractive to hold relative to others.
Greenspan, a fervent free-market advocate, said a massive rise in world competition that growing international trade had brought over the past half century had resulted in ''markedly higher standards of living'' for countries that participated in cross-border trade, particularly the United States.
The central banker harshly criticized the administration's trade policies for being too focused on the goal of job creation rather than overall standards of living. He also said it was too adversarial and noted that trade was not a zero-sum game in which a gain by one player is always to the detriment of the other.
''We try to promote free trade on the mistaken ground that it will create jobs. The reason should be that it enhances standards of living through the effects of competition on productivity,'' Greenspan said.
The notion of rising productivity that may have contributed to keeping inflation in check in the ninth year of an unbroken U.S. economic expansion has been a key feature in the debate about the sustainability of the nation's economic boom. |
