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Monday, July 18, 2005

Greenspan Expects Moderate Growth, Unconcerned with Yield Curve

GreenSpeak says the economy is set to expand at a moderate pace and the flattening of the yield curve does not change that assessment:

Greenspan says expect moderate growth, By Mark Felsenthal, Reuters: Although soaring oil prices have hampered U.S. economic growth, the economy is coping well and is set to expand at a moderate pace, Federal Reserve Chairman Alan Greenspan said in remarks released on Monday. Greenspan said Fed research found that the rise in oil prices since 2003 to above $60 a barrel is likely to shave about three-quarters of a percentage point from the U.S. gross domestic product this year. Rising energy costs sapped growth by a half-percentage point in 2004, he said in written responses to questions from Congressional Joint Economic Committee Chairman Jim Saxton, a New Jersey Republican. … The central bank head also said flat long-term interest rates, despite the Fed's short-term rate hikes, should not be interpreted as a clear sign of economic faltering.  "A sharp flattening of the yield curve is not a foolproof indicator of economic weakness," he said.  Greenspan said most statistical models that look at the yield curve -- different interest rates along the spectrum of Treasury debt maturities -- to forecast economic trends project moderate growth…

These remarks give little reason to believe that the Fed's short-term outlook has changed substantially, though the phrase "robust underlying growth" from the FOMC statement is now "set to expand at a moderate pace" indicating, perhaps, a change in view regarding the strength of economic growth.  We'll know more after Greenspan's remarks to congress later this week.

    Posted by on Monday, July 18, 2005 at 01:26 PM in Economics, Monetary Policy | Permalink  TrackBack (0)  Comments (2)


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