More good economy news

[strandinthewind]

Originally Posted by gldstwmn

He did? When? In his speech yesterday he said (I'm paraphrasing) it was still too soon as we had seen the end of deflation but we still hadn't seen strong enough signs of inflation. The FOMC meets may 4. The beige book comes out today. That should foretell a lot about what's going to happen on May 4.

http://money.cnn.com/2004/04/21/news...ex.htm?cnn=yes

Greenspan: Rates must rise

Fed chairman says inflation in check for now, but economy stronger, and Fed will act eventually.
April 21, 2004: 10:19 AM EDT

NEW YORK (CNN/Money) - The U.S. economy is growing with more vigor, and interest rates must eventually rise to keep inflation in check, Federal Reserve Chairman Alan Greenspan said Wednesday, another hint that a Fed rate hike is nearing.

While the threat of "disinflation," or a lack of corporate pricing power, seems to have faded, inflation is still dormant so far, since labor costs are flat, the central bank chairman said in prepared remarks delivered to the Joint Economic Committee of Congress.


"But the Federal Reserve recognizes that sustained prosperity requires the maintenance of price stability and will act, as necessary, to ensure that outcome," he added.

Fed policy makers are scheduled to meet May 4 to discuss the economy and their target for the federal funds rate, an overnight bank lending rate that influences other rates throughout the economy. Few analysts expect a rate increase at that meeting, but market participants expect a rate hike to come at the Fed's August policy meeting.

In listing signs of an economic acceleration this year, Greenspan cited a faster rate of growth in gross domestic product (GDP), strong consumer and business spending, a recovery in factory output, a bounce in exports, and a labor market that's "gradually improving."

"Looking forward, the prospects for sustaining solid economic growth in the period ahead are good," he said.

But he also warned that businesses still seemed cautious about spending on factory improvements, inventory building and hiring. He also noted that the recent boom in productivity, or output per worker hour, wasn't quite over yet, as companies continue to use technology to run more efficiently.

If demand is still strong when that process finally runs its course, Greenspan said, then hiring will need to accelerate, putting upward pressure on wages and, eventually, consumer prices.

"Should such an acceleration of costs persist ... higher price inflation would inevitably follow," Greenspan said.

Nevertheless, he indicated that such inflation wasn't exactly right around the corner.

"Still-significant productivity growth and a sizable margin of underutilized resources, to date, have checked any sustained acceleration of the general price level and should continue to do so for a time," he said.

[gldstwmn]

I think that pretty much reinforces my statement except they are now calling it "disinflation."

[strandinthewind]

Originally Posted by gldstwmn

I think that pretty much reinforces my statement except they are now calling it "disinflation."

??????????

Greenspan is saying that a rate hike may be necessary to forestall the threat of inflation?

[gldstwmn]

Originally Posted by strandinthewind

??????????

Greenspan is saying that a rate hike may be necessary to forestall the threat of inflation?

Yes.

http://www.lioninc.com/dft/op/marketcommentary

In his formal statement, Mr. Greenspan acknowledged the impressive progress that the economy has made and noted that prospects of continued growth were good. But he did qualify his optimism regarding the employment situation by observing that the labor market "now appears to be gradually improving after a protracted period of weakness" and he said that worker insecurity will take some time to subside.

He also noted that inflation did not currently pose a threat: "... although the recent data suggest that the worrisome trend of disinflation presumably has come to an end, still-significant productivity growth and a sizable margin of underutilized resources, to date, have checked any sustained acceleration of the general price level and should continue to do so for a time. Moreover, the initial effect of a slowing of productivity growth is more likely to be an easing of profit margins than an acceleration of prices."

His summary paragraph contained the closest warning of rate hikes to come but it was tempered by the observation that the inflation levels remain benign: "As I have noted previously, the federal funds rate must rise at some point to prevent pressures on price inflation from eventually emerging. As yet, the protracted period of monetary accommodation has not fostered an environment in which broad-based inflation pressures appear to be building. But the Federal Reserve recognizes that sustained prosperity requires the maintenance of price stability and will act, as necessary, to ensure that outcome."

[jwd]

gldstwmn:

By the way jwd, using a source such as The Heritage Foundation doesn't really make for a believable case.

Well before you roll your eyes, I would encourage you to search the net and look for articles on outsourcing. There are many articles from various publications and organizations that would corroborate what was said in the article I posted. I'm sure you could find one that is to your liking. It was merely food for thought. Whether you buy it, or believe it, is up to you.