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. Last Updated: 07/27/2016

Greenspan Guarded on Interest Rates

WASHINGTON -- U.S. Federal Reserve chairman Alan Greenspan said Tuesday that the central bank's decision about whether to raise interest rates again at its meeting in August would hinge in large part on economic data released in coming weeks.

Repeating a message he delivered to the Senate Banking Committee last week, Greenspan told the House Banking Committee that higher rates were starting to slow the economy and reduce the risk of inflation, an analysis that has sparked hope in financial markets that the Fed is finished or nearly finished raising rates.

But the Fed chairman said the extent of the slowdown remained unclear, and he seemed to warn investors not to assume the central bank's policy-making Federal Open Market Committee would remain on hold when it meets Aug. 22.

Reports in the next few weeks on the unemployment rate, job creation, compensation costs, the growth rate and inflation "will have a significant effect upon what action the committee chooses to take," Greenspan said.

At the August meeting, he said, "we will make a judgment as to whether or not further action or no action is the more appropriate policy for the purpose of creating a more balanced economy which has the capacity to continue this quite extraordinary 112-month expansion.''

The Fed has raised its benchmark short-term Federal funds rate by 1.75 percentage points in six steps since June 1999, to 6.5 percent, in an effort to squelch inflation pressures before they take root in the economy.

Greenspan's comments came on a day in which two economic indicators came in slightly stronger than analysts had expected.

Existing home sales increased by 2.8 percent in June, to a seasonally adjusted annual rate of 5.23 million. And the consumer confidence index published by the Conference Board, a business research group, increased to 141.7 in July, up from 139.2 in June, but still below the record level of 144.7 in January and May.

Asked about the consumer confidence numbers Tuesday, Greenspan said it was "clear that consumer confidence remains quite high in this country."