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To: Night Writer who wrote (78462)	2/17/2000 4:41:00 PM
From: Night Writer	Read Replies (1) \| Respond to of 97611

AG would like you guys to stop spending your ill gotten stock gains with wild abandon. You are hurting us poor country boys. NW Greenspan: Inflation Still a Danger WASHINGTON, Feb 17, 2000 (AP Online via COMTEX) -- Federal Reserve Chairman Alan Greenspan called the economy's record-breaking performance the best in a half century, but he warned Thursday that inflation remains a threat to the economic good times that many Americans are enjoying. Wall Street viewed Greenspan's remarks to the House Banking Committee as confirmation that the Fed will continue to rachet up interest rates this year until the economy slows to a more sustainable pace. In presenting the central bank's twice-a-year report on the economy to Congress, Greenspan reiterated his concerns that employers seeking scarce workers in the current 'tight' labor market may offer higher wages and benefits, increased costs that could lead to a sharp runup in product prices. 'At some point in the continuous reduction in the number of available workers willing to take jobs ... wage increases must rise above even impressive gains in productivity' that have helped to keep inflation low, Greenspan said. 'This would intensify inflationary pressures or squeeze profit margins, with either outcome capable of bringing our growing prosperity to an end,' he said. In efforts to slow the barreling economy and keep inflation at bay, the Fed has bumped up interest rates four times since June, overall pushing up by a full percentage point key interest rates that the Fed controls. But Greenspan said those increases have had little impact. 'There is little evidence that the American economy ... is slowing appreciably,' he said. Fed policy-makers 'will have to stay alert for signs that real interest rates have not yet risen enough to bring the growth of demand into line with that of potential supply,' Greenspan said. 'Achieving that alignment seems more pressing today than it did earlier.' Most analysts widely expect Fed policy-makers will boost interest rates again at their next meeting March 21, and many also anticipate another rate increase in May. Economists said Greenspan's comments appear to support their predictions of a series of rate increases this year. Sung Won Sohn, economist for Wells Fargo, viewed Greenspan's remarks as saying, 'The prescription that we need is high interest rates. I think Chairman Greenspan is probably getting the message that so far this slow-motion monetary policy has done nothing to dampen the enthusiasm in the economy and especially the stock market.' On Wall Street, the Dow Jones industrial average fell more than 46 points in afternoon trading but the Nasdaq rose more than 100. 'He talked tougher than some had expected,' said David Jones, chief economist at Aubrey G. Lanston & Co. Even though inflation has remained low outside of an energy price surge, Greenspan said this favorable condition cannot last unless the economy's growth rate slows to less than the 4 percent-plus gains of the past three years. Still, Greenspan marveled at the economy's performance: its record 9-year-long expansion; unemployment at a 30-year low of 4 percent; and strong gains in worker productivity -- output per hour of work. But even if the productivity gains continue, they could have a downside for the economy by pushing soaring stock prices even higher, Greenspan said. The Wall Street boom has contributed to the growth in consumer demand as investors have spent their stock gains with abandon. Responding to a question, Greenspan expressed some short-term worries about the leap in oil prices, which on Monday pushed the per-barrel price above $30 to the highest levels since the Persian Gulf War in 1991. Oil inventories have fallen to exceptionally low levels, he said, leaving the country vulnerable to a big price spike if supplies suddenly drop further. 'Some are joking that we need to measure the fumes to get any measurable inventory at all these days,' he said. But he also said conservation moves by businesses in recent years have significantly reduced manufacturers' energy needs. In its outlook for economic growth, the Federal Reserve was more optimistic than the administration or the Congressional Budget Office, predicting the gross domestic product will expand by around 3.5 percent this year. President Clinton based his current budget on a slower 2.9 percent prediction. The Fed also was more optimistic that inflation will slow this year, predicting that an inflation gauge tied to the GDP will rise by around 1.75 percent to 2 percent, compared with an increase of 2 percent last year. As he has before, Greenspan urged Congress to devote the huge federal budget surpluses being generated by the economic boom to paying down the national debt rather than for increased federal spending or cutting taxes. Copyright 1999 Associated Press, All rights reserved.