The semi-annual monetary policy report delivered to Congress Tuesday by U.S. Federal Reserve Chairman Alan Greenspan implies that U.S. rate hikes are not imminent, say Bank of Montreal economists.

“While the recovery remains intact, its strength has been undermined by a series of shocks, most notably the plunge in stock values. The speech, which largely met expectations,” says BMO, “suggested the Fed is in no rush to raise rates from current 40-year lows.”

Greenspan said the economy “appears to have withstood a series of blows” which would have produced a major recession in previous times. He attributed the economy’s surprisingly good performance to a “notable improvement in the resiliency and flexibility.” He forecast a return to “sustained healthy growth” based on fewer imbalances in inventories and capital goods, and strong productivity growth.

He also appeared cautious given the downturn in equities and ongoing concerns about corporate governance, notes BMO. “The chairman showed no tendency to adjust rates, in either direction, for a prolonged period. Although the current accommodative stance of policy will need to be re-normalized at some point, the Fed will likely remain sidelined pending evidence that the forces inhibiting economic growth are dissipating. Policymakers can bide their time because inflation pressures are well contained.”

The Fed forecasts growth this year and next of 3.5%-3.75% and 3.5-4% respectively, resulting in a very modest reduction in the jobless rate. “This, ostensibly, would suggest no increase in rates for the balance of the year,” says BMO.