DemocRATs PANIC! Economy Is On A Roll !
Watch the DemocRATs sink into despair, to cry out in the night and
gnash their teeth in great sorrow when they learn that the people are
doing very well -- that the country is experiencing sustained and
increasing good fortune: "The country is on a roll."
"The Bush Shall Appear In The Rose Garden For Four More." -Gospacho
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Greenspan Says U.S. Growth Solid
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By Glenn Somerville
WASHINGTON (Reuters) - The U.S. economy has entered a sustainable
expansion that is creating some price pressures, but inflation does not
now pose a major threat, Federal Reserve (news - web sites)
Chairman Alan Greenspan (news - web sites) told Congress on Tuesday.
Greenspan said an apparent recent slip in consumer spending likely
stemmed from higher energy costs and will probably prove short-lived.
In remarks prepared for the Senate Banking Committee, the Fed chief
noted that policy-makers said in June that interest rates likely will
rise at a "measured" pace but said the U.S. central bank will respond
as needed to check inflation.
"Not only has economic activity quickened, but the expansion has become
more broad-based and has produced notable gains in employment," the Fed
chief said in his semiannual review of monetary policy.
He said while some of the price pressures are due to temporary factors,
he couldn't be sure inflation would stay benign in the face of low
interest rates.
Economists saw his take on the economy as upbeat.
"It looks like Mr. Greenspan is saying the slowdown in the economy will
be short-lived and that suggests that the Fed will probably continue to
raise rates," said Gary Thayer, chief economist at A.G. Edwards & Sons
in St. Louis.
The dollar rose against the euro on Greenspan's remarks while bond
prices eased.
"The evident strengthening in demand that underlies this improved
performance doubtless has been a factor contributing to the rise in
inflation this year," Greenspan said. "But inflation also seems to have
been boosted by transitory factors such as the surge in energy prices."
He said recent price increases appeared in many cases to be a result of
businesses attempting to raise profit margins rather than due to
increased production costs.
"For the moment, the modest upward path of unit labor costs does not
appear to threaten longer-term price stability, especially if current
exceptionally high profit margins begin to come under more intense
competitive pressures at home and from abroad," Greenspan said.
"But 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," he added.
The Fed cut rates to a 1958 low of 1 percent by mid-2003 after a
13-step process that began in 2001. At its last policy session on June
29-30, it began reversing course by lifting its official federal funds
rate a quarter percentage point.
More rate rises are expected later this year, though analysts are
divided about the number and size. Greenspan said policy-makers will be
keeping a close eye on costs and prices as it weighs whether a
faster-operating economy generates more cost pressures.
http://tinyurl.com/6zbn6
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