Greenspan signals rate hike not likely

By George Hager
USA Today

WASHINGTON — Federal Reserve Chairman Alan Greenspan sent strong signals yesterday that he is in no hurry to raise rates, because inflation is under control and there's still a risk the economic rebound could turn into "a real slip back."

Greenspan told Congress' Joint Economic Committee that odds favor a healthy expansion, but that it won't become clear for another two to four months whether the recovery is a solid one. That would all but rule out a rate hike at the Fed's next meeting May 7, and it reduces the odds of an increase at the June 25-26 meeting.

The Fed chairman acknowledged that the Fed's target interest rate, which is at a 40-year low of 1.75 percent, can't stay at the same level indefinitely without risking inflation. But he said the Fed "should have ample opportunity" to raise rates to ward off an inflationary outbreak "once sustained, solid economic expansion is in view."

Asked whether he sees that expansion yet, Green-span replied: "It's not sufficiently in view to be comfortable with the outlook."

Greenspan told the committee he was speaking strictly for himself, but other Fed officials have also taken a wary tone about the recovery in recent speeches. Greenspan seemed even more cautious than most.

Chief among Green-span's worries is that the turbocharged growth that occurred in the first three months of this year might not last.