Posted on: Wednesday, July 18, 2001

Fed chairman says another rate cut possible

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WASHINGTON — Federal Reserve chairman Alan Greenspan cautioned today that the yearlong economic slowdown has not ended, and may require another interest-rate reduction.

"The period of subpar economic performance ... is not yet over, and we are not free of the risk that economic weakness will be greater than currently anticipated and require further policy response," Greenspan said in his twice-a-year report on the economy.

In an effort to stave off recession, the Federal Reserve has cut interest rates six times this year, for a total of 2.75 percentage points, the most aggressive credit-easing campaign in nearly two decades.

"Our front-loaded policy actions this year coupled with the tax cuts under way should be increasingly affecting economic progress as the year progresses," Green-span said in testimony to the House Financial Services Committee.

If those policies don't do enough to stimulate growth, the Fed can move again, because inflation is not a problem now, Greenspan said.

Economists viewed Green-span's remarks as sending a strong signal that another interest rate cut could come as soon as the Fed's next meeting Aug. 21.

Greenspan, declaring the rate of decline is clearly slowing, said he expects the economy to improve toward the end of the year.