Outlook: US interest rates

SO FAR so good, or so it appears. Alan Greenspan has now twice raised interest rates since the panic cuts of late last Autumn and this has been done without apparently damaging confidence in the American economy in any way, less still its soaraway bull market, which once again trades at close to its all-time peaks.

Whether this is entirely what he intended is open to question, for there is little point in raising interest rates if this fails to stay the boom. But actually the grand old man seems to have mellowed his view of the Wall Street "bubble" in recent months. Humbled before America's thundering herd of raging bulls, he has said it doesn't pay to pitch your judgement against that of millions of investors.

Many of these believe he is wrong to have raised rates even as far as he has. Steve Forbes turns Mr Greenspan's own words on him in the latest edition of Forbes magazine, accusing the Fed chairman of "irrational exuberance in mistakenly strangling the economy in the name of fighting a long dead inflation".

What is certainly true is that there is a growing belief that the American economy might be capable of achieving a soft landing after seven long years of growth, and that this might allow the bull market to continue, or at least to stabilise on a permanently high plateau. Unfortunately this view seems more likely to be a symptom of the mass delusion that sets in at the top of bull markets than to be soundly based on reality.

For the time being, however, American investors appear in no mood to sell, so the boom rolls on and Mr Greenspan must begin to find himself drawn more and more into the almost certainly flawed belief that the US economy has finally managed to abolish the business cycle.