Yesterday's (Tuesday, Feb. 1) New York Times carries the following:
FED CHIEF IMPLIES A PRE-INFLATION RISE IN RATES
Washington, Jan. 31--The Federal Reserve chairman, Alan
Greenspan, strongly implied today that the central bank would
break with tradition and raise interest rates before revived
inflation became clearly visible.
But Mr. Greenspan left unclear, as is his custom, how
close or how large the long-rumored "pre-emptive strike" might
be. . . .
President Clinton, commenting on Mr. Greenspan's testimony,
said that while low rates were vital to continued expansion, he
would not object to a modest increase if the move did not make
mortgages and other long-term borrowing more expensive.
. . .
Testifying before the Joint Economic Committee of Congress
in advance of a policy meeting to set interest rate policy for
the year, Mr. Greenspan said that "regrettably" the Fed had
erred frequently in the past by waiting too long to combat
inflation, which often accompanies rapid economic growth.
Etc. etc.
This seems an astonishing and outrageous policy to me. Can someone out there
explain what signs Greenspan could see in today's economy of rapid economic
growth, output approaching capacity, unemployment dangerously low, or anything
at all that would justify application of the brakes at this stage of the
business cycle? Dale Tussing.
