Fed set to `nip inflation in bud', warns Greenspan
Thursday 29 July 1999
The Fed Chairman also advised Congress to hold off tax cuts, saying uncertainty about the economy meant the big budget surplus could not be guaranteed to last. He added that a big tax cut now would run the risk of overheating the economy.
Mr Greenspan repeated his concern about the dangers in "euphoric" share price rises. The warning was read as a signal that it is only a matter of time before interest rates rise again, following June's increase.
However, the Fed Chairman's remarks on the economy, in a second session of Congressional testimony, left analysts divided as to whether the increase would come when the Fed's Open Markets Committee meets in late August or be postponed until October.
"A move in August is possible if we see any upward surprises in the data. But mortgage rates and corporate bond rates have already increased substantially. There is a lot of tightening already in the system," said James O'Sullivan, an economist at JP Morgan in New York.
Figures for unemployment and earnings in July, due at the end of next week, will come in for special scrutiny as Mr Greenspan emphasised the tight jobs market. He said yesterday: "There can be little doubt that, if the pool of job seekers shrinks sufficiently, upward pressures on wage costs are inevitable."
Most economists believe the economy has started to slow, a view expected to be confirmed today by figures for second-quarter growth. The Commerce Department reported yesterday that growth in orders for durable goods such as cars, appliances and industrial equipment tailed off last month, down to 0.3 per cent from 0.8 per cent in May.
New orders for industrial machinery - including computers - tumbled 5.4 per cent following a 4.5 per cent decline in May.
There was little market reaction to Mr Greenspan's remarks. The Dow Jones index initially fell 38 points to 10,941. The yield on benchmark Treasury bonds climbed to 6.03 per cent, having broken through the 6 per cent barrier earlier in the week.
On the foreign exchanges the dollar gained a little ground against the yen. Japanese ministers indicated that a 500 trillion yen supplementary budget was on the cards if figures for second-quarter growth in the economy are disappointing. It would be the second supplementary budget in the current fiscal year.
- 1 What happens to your body when you give up sugar?
- 2 This is what the photographer has to say about the picture of a weasel riding a woodpecker
- 3 Delhi bus rapist blames dead victim for attack because 'girls are responsible for rape'
- 4 Have sex with your iPad thanks to the new sex toy no-one asked for
- 5 Average penis size revealed: Scientists attempt to find what is 'normal' to reassure concerned men
Bill Clinton portrait features Monica Lewinsky reference, artist admits
Japanese island overrun with cats after population explodes
Delhi bus rapist blames dead victim for attack because 'girls are responsible for rape'
Pornhub turns masturbation into energy in bid to save the planet
The 'sex selfie stick' lets you FaceTime the inside of a vagina
'Jihadi John': CAGE representative storms off Sky News accusing Kay Burley of Islamophobia
Durham Free School: 'Creationism taught at' free school facing closure
Ukip would cut billions from Scottish budget to fund English tax cuts
Nearly 100,000 of Britain's poorest children go hungry after parents' benefits are cut
End of the licence fee: BBC to back radical overhaul of how it is funded
Ukraine crisis: Top Chinese diplomat backs Putin and says West should 'abandon zero-sum mentality'
iJobs Money & Business
£15000 - £18000 per annum: Recruitment Genius: This is a great opportunity for...
£50000 - £60000 per annum + Excellent Salary: Austen Lloyd: An outstanding new...
£20000 - £21000 per annum + uncapped commission: SThree: As a graduate you are...
£25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...