Greenspan opens door to further US rate cut

THE CHAIRMAN of the Federal Reserve, Alan Greenspan, yesterday opened the door to another cut in US interest rates, and signalled that it may come sooner rather than later.

In a speech to business economists in Washington, he indicated that the scale of the economic downturn might be more severe than so far thought. "We are clearly facing a set of forces that should be dampening demand going forward to an unknown extent," Mr Greenspan told the National Association of Business Economics. "This is a time for monetary policy to be especially alert."

His comments will put more pressure on the Bank Of England to cut UK interest rates when the Monetary Policy Committee announces its decision at noon today.

A poll of City economists yesterday showed that 20 out of 32 expect a rate cut. A survey by Reuters put the chances of a cut at 55 per cent.

However, there remains a sizeable minority in the City which believes that the Bank may hold its nerve in the face of thinly-disguised attempts by the Chancellor, Gordon Brown, to bounce it into a rate cut.

Yesterday Mr Brown sought to soothe ruffled feathers at the Bank by telling BBC Radio: "I backed the Bank of England and I will back them in any decision they make this week."

Figures released yesterday by the Office for National Statistics suggested that pay pressures in the economy might not be as high as thought. The figures showed that bonuses paid in March were 30 per cent higher than a year ago and contributed 0.5 per cent to the average earnings index.

JP Morgan warned that even if rates fall today, the UK and US are both heading for recession next year. The bank's latest quarterly survey slashes both growth and interest-rate forecasts. Economist David Mackie said he believed that the UK would be in recession by the first quarter of 1999 and that base rates will be down to 4.5 per cent by the end of 1999.

"That is quite aggressive, but we see next year as being the weakest for the world economy since 1950," Mr Mackie said.

George Magnus of Warburg Dillon Read said that the Governor of the Bank of England, Eddie George, will have come back from Washington with the clear message that central banks need to stand together to provide liquidity. "If they don't cut it will be a big error of judgement. It means the cut in November will be even bigger. I think they will cut tomorrow and again in November."

Mr Greenspan's remarks support the view that more cuts are likely to combat a possible global economic downturn.

The move by the Federal Open Market Committee a week ago to reduce US rates by just a quarter of a percentage point disappointed markets. Many had hoped for a half-point cut. But in weekend discussions between the G7 industrial nations, the US, Canada and Britain all committed to easing monetary policy.

Mr Greenspan's comments and an overnight rise in the Tokyo stock market helped boost Wall Street, with the Dow Jones index about 100 points higher at mid-morning.

Congress is moving closer to approving new US contributions to the International Monetary Fund, a leading Republican said yesterday.

News
peopleFrankie Boyle responds to referendum result in characteristically offensive style
Arts and Entertainment
Highs and lows of the cast's careers since 2004
News
news
New Articles
i100... with this review
PROMOTED VIDEO
Have you tried new the Independent Digital Edition apps?
News
ebooksAn unforgettable anthology of contemporary reportage
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Cover Supervisor

£75 - £90 per day + negotiable: Randstad Education Group: Are you a cover supe...

Marketing Manager - Leicestershire - £35,000

£30000 - £35000 per annum: Ashdown Group: Marketing Manager (CIM, B2B, MS Offi...

Marketing Executive (B2B and B2C) - Rugby, Warwickshire

£22000 - £25000 per annum: Ashdown Group: A highly successful organisation wit...

SEN Coordinator + Teacher (SENCO)

£1 per day: Randstad Education Leeds: Job Purpose To work closely with the he...

Day In a Page

Scottish referendum: The Yes vote was the love that dared speak its name, but it was not to be

Despite the result, this is the end of the status quo

Boyd Tonkin on the fall-out from the Scottish referendum
Manolo Blahnik: The high priest of heels talks flats, Englishness, and why he loves Mary Beard

Manolo Blahnik: Flats, Englishness, and Mary Beard

The shoe designer who has been dubbed 'the patron saint of the stiletto'
The Beatles biographer reveals exclusive original manuscripts of some of the best pop songs ever written

Scrambled eggs and LSD

Behind The Beatles' lyrics - thanks to Hunter Davis's original manuscript copies
'Normcore' fashion: Blending in is the new standing out in latest catwalk non-trend

'Normcore': Blending in is the new standing out

Just when fashion was in grave danger of running out of trends, it only went and invented the non-trend. Rebecca Gonsalves investigates
Dance’s new leading ladies fight back: How female vocalists are now writing their own hits

New leading ladies of dance fight back

How female vocalists are now writing their own hits
Mystery of the Ground Zero wedding photo

A shot in the dark

Mystery of the wedding photo from Ground Zero
His life, the universe and everything

His life, the universe and everything

New biography sheds light on comic genius of Douglas Adams
Save us from small screen superheroes

Save us from small screen superheroes

Shows like Agents of S.H.I.E.L.D are little more than marketing tools
Reach for the skies

Reach for the skies

From pools to football pitches, rooftop living is looking up
These are the 12 best hotel spas in the UK

12 best hotel spas in the UK

Some hotels go all out on facilities; others stand out for the sheer quality of treatments
These Iranian-controlled Shia militias used to specialise in killing American soldiers. Now they are fighting Isis, backed up by US airstrikes

Widespread fear of Isis is producing strange bedfellows

Iranian-controlled Shia militias that used to kill American soldiers are now fighting Isis, helped by US airstrikes
Topshop goes part Athena poster, part last spring Prada

Topshop goes part Athena poster, part last spring Prada

Shoppers don't come to Topshop for the unique
How to make a Lego masterpiece

How to make a Lego masterpiece

Toy breaks out of the nursery and heads for the gallery
Meet the ‘Endies’ – city dwellers who are too poor to have fun

Meet the ‘Endies’ – city dwellers who are too poor to have fun

Urbanites are cursed with an acronym pointing to Employed but No Disposable Income or Savings
Paisley’s decision to make peace with IRA enemies might remind the Arabs of Sadat

Ian Paisley’s decision to make peace with his IRA enemies

His Save Ulster from Sodomy campaign would surely have been supported by many a Sunni imam