Greenspan Wants to Prolong Boom
- By Jeannine Aversa
- Jan. 28 2000 00:00
WASHINGTON -- U.S. Federal Reserve chairman Alan Greenspan said at his renomination hearing he wants to prolong the near-record expansion by keeping inflation low, reinforcing expectations for a rate hike next week.
Greenspan was speaking Wednesday to the U.S. Senate Banking Committee, which must approve his renomination for a fourth term as chairman. Committee members heaped praise on the 73-year-old central bank chief and pledged to support his reappointment.
"Our challenge in monetary policy is to foster, as best we can, the financial conditions that will allow this economic expansion and technological revolution to continue as long, and as vigorously, as possible," Greenspan said.
His appearance came less than a week before the Fed's next policy meeting on Feb. 1 to 2. Most economists expect the central bank to raise the key federal funds overnight bank lending rate by a quarter percentage point to 5.75 percent to keep the sizzling economy from overheating.
Greenspan was "effectively confirming [again] a 25 basis point hike next week," Rory Robertson, interest rate strategist at Macquarie Bank, said in a commentary after the hearing.
Greenspan said experience had shown price stability was key to maintaining prosperity and stability in the booming U.S. economy, which is about to enter its 107th month of growth and surpass the 106-month streak set in 1969.
Greenspan also vowed the Fed would continue its recent efforts to be more open about communicating its decisions and the reasons behind them to the public and the markets.
Greenspan's reappointment is expected to meet with overwhelming approval, first from the committee and then from the full Senate, in votes set for Feb. 1.
Senate Banking Committee Chairman Phil Gramm, a Texas Republican, said he would "vigorously support" the renomination of Greenspan, to whom he gave much credit for the long-running expansion. He was also supported by other members of the panel, who lauded Greenspan's record since 1987.
Answering questions, Greenspan reiterated a long-standing warning that the booming U.S. economy was running out of available workers, going as far as to suggest that the country's immigration laws should be relaxed.
The Fed has long worried that the nation's tight labor markets will create inflationary wage and price pressures.
Greenspan said the U.S. trade and current account imbalances are partly a result of an "incredible rise" in domestic demand but their current levels cannot be sustained in the long run.
"The current trade balance is being engendered at this point by one; the incredible rise in demand domestically in the United States, and, indirectly and in a related sense, the very high rates of return that are available," on investments in new technology in the United States, Greenspan said.