The chairman of the U.S. Federal Reserve says the nation's central bank could cut interest rates even further if that's what it takes to jump-start the sluggish American economy. Alan Greenspan is concerned about an economy that has so far failed to rebound, as well as the risk of deflation.
Interest rates are already at their lowest point in nearly half a century, and Fed Chairman Greenspan told Congress that the nation's central bank is prepared to keep them at that level "for as long as needed to promote satisfactory economic performance."
There have been 13 interest rate cuts in the past two years. In testimony to Congress, the Fed chief signaled the central bank may be ready to reduce them even further in order to boost a sluggish economy which is also being blamed in part for a projected U.S. government budget deficit expected to top $450 billion.
Democrats say the soaring deficit can be blamed on President Bush's failed economic programs, including a $350 billion tax cut. But White House spokesman Scott McClellan brushed aside the projected levels of red ink, saying the administration expects the deficit will be cut in half, provided the economy gets moving again.
"We had a recession. We also had declining revenues because of that," explained Mr. McClellan. "We had a war on terrorism. That's what led to the deficit we're in today."
In his Congressional testimony Tuesday, Fed chief Alan Greenspan said he favors tax cuts as a way of boosting the economy but stresses any cuts in government revenue need to be offset by reductions in federal spending in order to get the deficit under control.