In a semi-annual testimony to Congress, Federal Reserve Chairman Alan Greenspan said that the Fed should continue to raise interest rates as the growth outlook in the U.S. remains positive.
“Our baseline outlook for the U.S. economy is one of sustained economic growth and contained inflation pressures,” Greenspan said to the House Banking Committee.
Though he did note that there was an economic slowdown in the Spring, he maintained that the economy is looking positive, and that said that the Fed will continue to raise rates at the same gradual pace that it has been. Bloomberg News reports:
The 79-year-old Fed chairman’s prepared remarks described an economy that “has remained on a firm footing” with inflation that “continues to be well contained” even as oil and home prices rise. He quoted the Federal Open Market Committee’s most recent monetary policy statement at the end of his remarks, saying “policy accommodation can be removed at a pace that is likely to be measured.”
The FOMC has raised its benchmark overnight lending rate to 3.25 percent in nine successive moves since June 2004. The economy grew at a 3.8 percent rate in the first quarter and 4.4 percent for all of last year.
According to the Fed, the economy should grow by 3.5%. This has been revised from the estimate made in February, which called for growth of 3.75% to 4%.
Greenspan says that there are three main factors that could threaten the new economic outlook. These include wage pressures, rising energy costs, and if long-term interest rates rise too much, sectors like housing could become a problem.
Chris is a staff writer for Murdok. Visit Murdok for the latest ebusiness news.
