Greenspan Believes US Economy 'to Start Accelerating'

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Last updated at: (Beijing Time) Thursday, November 14, 2002

Greenspan Believes US Economy 'to Start Accelerating'

US Federal Reserve Chairman Alan Greenspan said on Wednesday that he believes the US economy will come out of "soft patch" and start accelerating.

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US Federal Reserve Chairman Alan Greenspan said on Wednesday that he believes the US economy will come out of "soft patch" and start accelerating.

In a testimony before the Joint Economic Committee of the US Congress, Greenspan said that the US Fed would not hesitate to cut interest rates further if necessary to bolster the wobbly economy. But he also indicated that the central bank believes the most likely economic outcome is a return to stronger growth next year.

If the economy does rebound, Greenspan said, the Fed is ready to quickly reverse course and begin raising interest rates to makesure that the extraordinarily low interest rates of the past year do not drive prices in the United States higher.

"You cannot stay at 1.25 (percent) federal funds rate indefinitely without ultimately engendering inflationary pressures," Greenspan said.

However, he said that he believed that the most likely outcome for economic growth is "to come out of this soft spot and to startaccelerating."

Greenspan dismissed concerns that the Fed was in danger of running out of ammunition just at a time when economic weakness could trigger deflation, a prolonged bout of falling prices.

He said the United States was not "close to a deflationary cliff." If such a threat did emerge, the Fed was prepared to use avariety of tools to boost the money supply beyond its normal approach of targeting the federal funds rate.

The US Fed reduced the federal funds rate last week by a half-point to 1.25 percent, the lowest level since July 1961.

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