Associated Press
WASHINGTON — Federal Reserve Chairman Alan Greenspan yesterday rejected suggestions that the economy slowed dramatically because the central bank bungled the handling of monetary policy. He said the Fed’s string of rate increases that ended in May probably prevented an even more severe slowdown.
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| Federal Reserve Chairman Alan Greenspan says that the economy not in a recession |
Greenspan told members of the House Budget Committee that he did not accept the view of critics that the Fed, which was raising rates through May of last year, had waited too long to begin reducing rates in the face of growing signs of economic weakness.
Instead, Greenspan said that had the Fed moved too soon to cut rates, it could have forced an even larger adjustment than is currently occurring. Green-
span has said previously that he believes economic growth at present is close to zero but that the economy is not in a recession.
"In retrospect, I see nothing that we did that was inappropriate in terms of policy," Greenspan said in response to questions.
On Wall Street, stock indices fluctuated broadly. At midday, the Dow Jones industrial average was down 18 points and the Nasdaq index had dropped 42 points.
Greenspan repeated his views that the government’s budget surpluses have grown so large that there is room to cut taxes. But again he refused to specifically endorse President Bush’s $1.6 trillion package as the correct size. That is a judgment call for Congress and the administration, he said.
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