Greenspan caution hits shares

STOCK markets suffered today after Alan Greenspan failed to give the bullish assessment of the US economy that many had hoped for.

The Federal Reserve chairman said he was prepared to keep US interest rates low for a 'considerable' time to lift the economy and ward off the threat of deflation.

'The Federal Open Market Committee stands prepared to maintain a highly accommodative stance to policy for as long as needed to promote satisfactory economic performance,' he told the House of Representatives.

'Policy accommodation aimed at raising the growth of output, boosting the utilisation of resources and warding off unwelcome disinflation can be maintained for a considerable period without ultimately stoking inflationary pressures.'

The Fed cut rates to just 1% last month - the lowest for 45 years. Greenspan said that although factory output had stabilised, consumer spending had held up and the housing market remained strong, latest data on employment and overall output were mixed. Figures earlier today showed US retail sales rose 0.5% in June.

An opening Wall Street rally was reversed after his comments, sending the blue-chip Dow down more than 30 points at one stage.