Greenspan Warns Inflation May Derail Rate Increases

출처 : 뉴욕타임즈 By EDMUND L. ANDREWS Published: July 20, 2004 WASHINGTON, July 21 — Alan Greenspan, chairman of the Federal Reserve Board, said today that the economic recovery appears to be "self-sustaining" but warned that higher inflation could still derail the central bank's goal of raising interest rates slowly. "We cannot be certain that this benign environment will persist and that there are not more deep-seated forces emerging as a consequence of prolonged monetary accommodation," Mr. Greenspan told the Senate Banking Committee. In a carefully hedged presentation, Mr. Greenspan veered little from the Fed's basic message when it raised interest rates on June 30 and made it clear that it hopes to keep raising rates at a "measured" pace over the next year. Mr. Greenspan reiterated his view that recent price increases are mainly the result of "transitory factors," like higher oil prices. He also expanded on his view that corporate profits have been so high that businesses have ample room to offer higher wages without raising prices to consumers. But even though consumer prices climbed more slowly in June, and economic growth appears to have cooled in the last two months, Mr. Greenspan gave investors no reason to think that the central bank might go slower than previously thought. If anything, he stepped up his warning about the uncertainties that surround both the outlook for growth and inflation. "If economic developments are such that monetary policy neutrality can be restored at a measured pace, a relatively smooth adjustment of businesses and households to a more typical level of interest rates seems likely," Mr. Greenspan said. The surprisingly tentative tone to that formulation came in contrast to Mr. Greenspan's more extended attempt to buttress his view that "core" inflation, excluding volatile areas like food and energy, is likely to remain below 2 percent through the end of next year. On balance, the Fed chairman veered very little from the central bank's statement on June 30, when it raised short-term interest rates by a quarter-point from 1 to 1.25 percent. Many analysts, particularly in the bond markets, have sharply criticized the Federal Reserve for keeping interest rates too low for too long and ignoring signs of incipient inflation. Since the Fed's decision last month, new economic data has tended to buttress Mr. Greenspan's view that the inflation will remain mild. Consumer prices climbed more slowly in June than in previous months, and a number of indicators, like retail sales, have suggested that economic growth has slowed from its rapid rate of 3.9 percent in the first quarter of this year. Mr. Greenspan appeared unswayed by those signs, predicting that growth will remain strong and that the outlook for inflation has not changed. "Despite the softness of recent retail sales, the combination of higher current anticipated future income, strengthened balance sheets and still-low interest rates bodes well for consumer spending," Mr. Greenspan said. "For the moment, the modest upward path of unit labor costs does not appear to threaten longer-term price stability," he continued. But he carefully repeated his warning about "uncertainties" and said the Federal Reserve "will continue to pay close attention to incoming data, especially on costs and prices." In its semiannual monetary report to Congress, which Mr. Greenspan delivered to the banking committee today, the central bank predicted that the economy will expand as much as 4.75 percent in 2004 but that growth will slow to 3.5 percent or 4 percent in 2005. The Fed predicted that core inflation will range between 1.5 and 2 percent in 2005, which is at the very highest boundaries of what Fed officials consider acceptable. Though Mr. Greenspan predicted that the job market will continue to improve, the Fed predicted that the unemployment rate will decline only slightly from 5.6 percent last month to between 5 and 5.25 percent at the end of 2005.