The head of the U.S. central bank, Alan Greenspan, Tuesday told a congressional committee that the American economy appears to have entered a period of solid growth.
Mr. Greenspan rejected suggestions that the economy is slowing down and predicted that growth will reach four and a half percent this year. The recovery that began over two years ago, he said, is solid and job growth is likely to gain momentum in the months ahead. "All of the other qualitative indicators that we have currently in the third quarter suggest that employment is continuing to expand. And indeed there has been weakness in June, and a number of your colleagues have mentioned this, July seems to somewhat better even though we are going through a soft patch," he said.
The U.S. economy has been creating on average over 250,000 new jobs monthly during the past six months.
Mr. Greenspan refused to indicate whether there will be another small increase in short-term interest rates when the Federal Reserve meets at the end of August. Last month the fed raised rates by one quarter percent from what still remains an over 40 year low. But the central bank chief did say that he is pleased that the economy seems prepared for higher rates. "In short, Mr. Chairman, households along with financial institutions and businesses seem to be reasonably well prepared to cope with the transition to a more neutral stance in monetary policy," he said.
The central bank had sharply lowered the cost of borrowing in 2002 and 2003 to encourage economic activity and promote recovery from the 2001 recession. Mr. Greenspan said further rises in energy prices would pose a risk to the otherwise strong economic rebound.