Fed chief says problems abound in rest of world

He repeats for House his warning on rates

Central bank

February 25, 1999|By BLOOMBERG NEWS

WASHINGTON -- Federal Reserve Chairman Alan Greenspan offered the House Banking Committee the same optimistic outlook he gave the Senate: The Fed's best guess is the U.S. economy will continue to expand at a robust pace with no evidence of inflation.

Still, the Fed chairman said policy-makers are struggling with a global economy that's not following historical road maps. Economies around the world have slowed, yet the United States is booming -- and has no inflation.

"What we do is to endeavor to understand how the world at large is impacting on us. And that's becoming ever increasingly more complex," Greenspan said.

For that reason, he repeated his warning that the central bank is prepared to raise or lower interest rates right away if "imbalances and distortions" in the economy develop.

Many of the House members' policy questions focused on Greenspan's prescriptions for sustaining stable prices in the United States and maintaining what is now the longest peacetime expansion ever.

He advised first that they not increase spending or cut taxes, and he reiterated his view that using projected government budget surpluses to pay down the national debt would be the biggest boost to the economy.

He also said again he would oppose the Clinton administration's plan to raise the minimum wage from its current $5.15 an hour.

It would be inflationary, he said, and would push unemployment higher among the least skilled, particularly teen-agers.

Rep. Bernard Sanders of Vermont, a Socialist, asked if Greenspan's opposition to wage increases extended to the ever-growing compensation of American chief executives.

"If their shareholders are willing to do it, they're wasting their money in many respects, and I find a lot of those things a lot of what is being paid to individual CEOs is not directed to the value of their shareholders who are paying the bill," Greenspan said.

"In both cases, I'm arguing that government should not be involved. I'm being consistent in that respect."

Pub Date: 2/25/99

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