US Federal Reserve Chairman Mr Alan Greenspan hinted strongly that another interest rate cut was on the cards, when he testified to Congress yesterday that "the risks would seem to remain mostly tilted toward weakness on the
economy".
The Federal reserve has already cut US short term interest rates six times or 2.75percentage points, this year to boost the flagging economy.
Warning that the economic slowdown in the United States has not run its course, Mr Greenspan told a House of Representatives panel: "The period of sub-par economic performance ... is not yet over, and we are not free of therisk that economic weakness will be greater than currently anticipated and require further policy response."
Mr Greenspan said he hoped that the Fed's rate reductions along with falling energy costs and tax-rebate checks issued under the Bush administration's tax reform will boost economic growth in the coming months.
He defended the Fed's actions this year saying that "by aggressively easing the stance of monetary policy, the Federal Reserve has moved to support demand, and, we trust, help lay the groundwork for the economy to achievemaximum sustainable growth."
Underlying inflation has been kept to a modest rate, the Fed chairman saidand inflation should remain under control because of reduced energy prices.Inventories had also been considerably reduced and he hoped his policieswould induce an increase in capital spending, a key to recovery.
But Mr greenspan admitted candidly that the Fed finds it difficult to map out the future of the US economy. "Uncertainties surrounding the current economicsituation are considerable," he said.
Until there is more evidence that businesses have successfully completed getting their excess stocks in linewith sales and companies ramp up investment in computers and other equipment, "the risks would seem to remain mostly tilted toward weakness in the economy," Mr Greenspan said.