WASHINGTON -- Federal Reserve Chairman Alan Greenspan today declared the current good times ''unprecedented in my half-century of observing the American economy.'' But he cautioned that inflation dangers still exist and put financial markets on notice to expect further interest rate increases.
Presenting the Federal Reserve's twice-a-year report on the economy to Congress, Greenspan said conditions are remarkable with the 9-year-long expansion, a record, turning in exceptionally rapid growth that has driven unemployment to a 30-year low of 4 percent.
Even though inflation has remained low outside of a burst in energy prices, Greenspan said, this favorable condition cannot last unless the growth rate slows to less than the 4 percent-plus gains of the past three years.
Greenspan tied his worries to the tight labor markets and fears that workers will begin to demand higher wages that could set off an inflationary spiral. Since last June, the central bank has been trying to slow the economy, raising a key interest rate it controls by a full percentage point.
However, Greenspan said today there is little evidence that those four quarter-point increases in the federal funds rate have had much impact.
Analysts believe that the FOMC, the group of Fed board members in Washington and Fed regional bank presidents that sets interest rate policy, will boost rates for a fifth time March 21 and very likely will raise rates a sixth time in May.
With investors apparently already resigned to another interest rate increase, markets registered only mild reaction to Greenspan's report. The Dow Jones industrial average had lost about 30 points by late morning.
Brainerd Dispatch ©2013. All Rights Reserved.