Monday, June 14, 1999

Greenspan: Productivity
gains may be near peak

The Fed chairman says technology
has fueled the economy

By Jeannine Aversa
Associated Press


WASHINGTON -- The United States cannot rely on rising productivity to keep inflation under control forever, Federal Reserve Chairman Alan Greenspan said today -- a sign to some analysts that the Fed may raise interest rates to slow the red-hot economy and keep inflation at bay.

Greenspan, opening a three-day congressional summit on high technology, credited American investment in productivity-enhancing equipment, such as microprocessors, satellites and high-speed communications lines, for the nation's productivity boom.

Those productivity gains have fueled America's remarkable economic growth and helped keep inflation low, he said.

Productivity -- the amount of output per hour of work -- has been growing at an annual rate of around 2 percent since 1995, double the annual gains of the previous two decades, Greenspan told the congressional Joint Economic Committee.

But Greenspan cautioned that these productivity gains can't go on forever. "The growth of productivity cannot increase indefinitely," he said. "While there appears to be considerable expectation in the business community, and possibly Wall Street, that the productivity acceleration has not yet peaked, experience does advise caution."

Greenspan didn't say what action, if any, the Federal Reserve would take at the end of month on interest rates. But some private economists believe his remarks could be setting the stage for the Fed to raise interest rates at its next meeting on June 29 and 30. Many believe Greenspan will be more blunt about the prospects of a rate hike in a Thursday congressional appearance.

"He's setting up why the Fed will tighten if the consumer price index number is bad or disconcerting," said Stan Shipley, an economist with Merrill Lynch. "It's clear that they are concerned and may want to tighten."

E-mail to Business Editor

Text Site Directory:
[News] [Business] [Features] [Sports] [Editorial] [Do It Electric!]
[Classified Ads] [Search] [Subscribe] [Info] [Letter to Editor]
[Stylebook] [Feedback]

© 1999 Honolulu Star-Bulletin