(July 21) – “Federal Reserve Chairman Alan Greenspan assiduously kept his options open for monetary policy over the next few months, saying he wasn’t ready to declare a formal end to the central bank’s yearlong campaign of raising interest rates,” writes Jacob Schlesinger in today’s Wall Street Journal.
“‘It is much too soon to conclude’ that ‘concerns’ about inflationary pressures “are behind us,” Mr. Greenspan said in his semiannual report to Congress. ‘We cannot yet be sure that the slower expansion’ evident in recent economic data ‘will persist,’ he added.
“At the same time, however, Mr. Greenspan suggested that if trends showing economic moderation continue — and he gave a long list of reasons why he suspected they would — the Fed is unlikely to raise rates at its Aug. 22 meeting or beyond.
“Mr. Greenspan made clear to the Senate Banking Committee that as long as the economy conclusively cooled a bit, he was comfortable with the unemployment rate resting at its current three-decade low. Some of the more hawkish members of the Fed’s rate-setting committee have argued that the central bank would have to push the jobless rate up significantly in order to keep inflation in check, implying a need for much higher rates even if growth slows.”