Fed chairman's prepared remarks see solid economic growth ahead, reaffirms Fed policy. June 9, 2005: 11:30 AM EDT
NEW YORK (CNN/Money) - Federal Reserve Chairman Alan Greenspan does not see a significant slowdown in the U.S. economy ahead or major risk from a housing bubble, he told lawmakers Thursday.
In remarks to the Joint Economic Committee of Congress, Greenspan said earlier warning signs of slower economic growth "were not presaging a more serious slowdown in the pace of activity."
His remarks, ending with a reference to the "measured" language the central bank used in its last policy statement regarding rate increases, suggested the Fed will retain its policy of quarter-point interest rate hikes, at least for the foreseeable future.
"Despite some of the risks that I have highlighted, the U.S. economy seems to be on a reasonably firm footing, and underlying inflation remains contained," he said.
On Wall Street, stock prices edged lower and Treasury bond prices fell as well, nudging the yield on the 10-year note up to 3.99 percent from 3.94 percent Wednesday. Bond prices and yields move in opposite directions.
Long-term Treasury yields have fallen sharply in recent weeks as investors took some sluggish economic reports and remarks from Dallas Fed President Richard Fisher as signs the Fed may soon pause in its rate-hiking campaign.
On whether recent gains in housing prices have produce a "bubble," Greenspan said that while "we certainly cannot rule out home price declines, especially in some local markets, these declines, were they to occur, likely would not have substantial macroeconomic implications."
He did express alarm about some of the loans that homeowners are using to buy houses at increased prices, such as interest-only loans.
Those loans and "the introduction of other relatively exotic forms of adjustable rate mortgages, are developments of particular concern," he said.
The Fed has raised short-term rates eight straight times as the central bank tries to fight off inflation. But investors and economists have been hotly debating whether the Fed should pause -- or maybe even end -- its rate increases after the economy hit a soft patch last spring.
And while the government said last month that first-quarter economic growth was stronger than initially thought, bond investors still seem more concerned about a possible economic slowdown than a pickup in inflation.
The Fed raises rates when it wants to ward off inflation and cuts them to spur economic growth.
Even though it's raised the target for its fed funds rate, an overnight bank lending rate, to 3 percent from 1 percent last summer, longer-term bond yields, which are set by the market, have fallen -- a phenomenon Greenspan has called puzzling.
-------------------- Raptor----Don't confuse bad luck with bad judgement
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"...longer-term bond yields, which are set by the market, have fallen -- a phenomenon Greenspan has called puzzling."
Greenspan is not in touch with reality.
"...The Bush administration predicted on Wednesday that economic growth would be slightly slower and inflation slightly higher this year than it expected six months ago.
Despite the revisions, the White House predicted that economic growth would be faster than normal, which could mean that in 2005, for the first time in four years, the federal budget deficit would be less than the previous year's."
Edmund L. Andrews, New York Times
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"...economic growth would be slightly slower...."
"...economic growth would be faster than normal...."
Typical Bush thinking; absolute stupidity and deceit.
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I was beginning to think I scared away Glassman with my tattoo.
Greenspan does ok. However, he is so disassociated from common everyday life, the life we lead, he becomes befuddled. He is too rich, doesn't have to work much, lives in isolation of wealth.
Doubtful you would see Greenspan living in an apartment over in the Bronx, nor living in a bullet riddled home over in South Central L.A.
Greenspan is unaware of this tremendous effect the real estate market has on interest rates. He has a castle which realtors and bankers do not bother to visit. Greenspan has no need to go out and hustle to make a buck.
Bush, what can I write? The man is a total idiot.
Whitehouse press release, paraphrased,
"The economy is slowing down! The economy is growing fast!"
Jeeeshh...
Bush assumes the American public to be gullible gits.
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