More good economy news

[gldstwmn]

Originally Posted by strandinthewind

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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."