Federal Reserve's Greenspan sees signs of a turnaround in U.S. economy
Tuesday, June 3rd 2003, 12:00 am
News On 6
BERLIN (AP) -- Federal Reserve chairman Alan Greenspan lauded the "remarkable resilience" of the U.S. economy on Tuesday, predicting that growth will pick up soon and praising the timing of the Bush administration's tax cut.
Speaking by video link to other top central bankers gathered in Berlin, Greenspan said indications were that a "fairly marked turnaround" was on the way.
"The most important news about the American economy in the last several quarters was evidence of a remarkable resilience that we had not been aware of," Greenspan said in remarks to the International Monetary Conference banking forum.
The dollar rose following his remarks, but currency analysts differed on whether that was related to Greenspan's remarks. The euro was quoted at $1.1750 in late New York trading, down from $1.1763 Monday.
Multiple shocks in the past several years -- including the Sept. 11 terrorist attacks, the bursting of the stock-market bubble and corporate accounting scandals -- would have meant a serious recession 30 or 40 years ago, Greenspan said. But years of deregulation, and the flexibility learned from the pressures of global competition, have made U.S. businesses and the economy more resilient today.
"I expect the growth rate to quicken in the United States," Greenspan said. " ... everything seems to be in place."
Recent gains in productivity supported economists' predictions that the economy would see an upswing in the third quarter, which begins July 1, he added.
Greenspan said the tax cuts signed into law last week by President Bush would help, even though the Fed chairman said he generally opposed trying to steer the economy with government tax and spending policy.
Tax authorities have told employers to start reducing the amount of federal income tax withheld from workers' paychecks by July 1, which mean some employees will see larger checks starting next month -- an immediate economic stimulus from the 10-year, $350 billion package of cuts.
"Fortuitously, this particular cut in taxes is happening at the right time," the central banker said. But he added that the federal government could face "major problems" in years ahead with budget deficits, because "all endeavors to constrain spending have broken down and have not recovered."
Greenspan spoke after European Central Bank President Wim Duisenberg, who forecast that Europe also would see "some acceleration in economic activity in the second half of this year and thereafter."
Duisenberg said the strength of the euro, which last week reached its highest-ever level against the U.S. dollar, would not dash chances for a recovery.
Other central bankers at the Berlin conference were Bank of England head Sir Edward George, Bank of France governor Jean-Claude Trichet and Toshiro Muto, deputy governor of the Bank of Japan.