Greenspan: No rush to raise rates

FEDERAL Reserve Chairman Alan Greenspan says prospects for the US economy have brightened but has sent a clear signal that the central bank is in no rush to raise interest rates. He told the US Congress that inflation pressures, despite surging oil prices, were well-contained.

In his first testimony on the economy since early March, Greenspan sought to assure jittery financial markets that the central bank feels no need to start raising a key interest rate, the federal funds rate, which is at a 40-year low.

'Prospects for low inflation and inflation expectations in the period ahead mean that the Federal Reserve should have ample opportunity to adjust policy to keep inflation pressures contained once sustained, solid, economic expansion is in view,' he told Congress' Joint Economic Committee.

His testimony was in line with the expectations of most economists. They predict the Fed will begin to raise rates but probably not until August, with policy-makers preferring to allow the recovery from the last year's recession to take hold.

Greenspan several times mentioned rising oil prices, but said that unless they rose beyond the recent trading range, the damage to the economy would be limited.

'The US economy has displayed a remarkable resilience over the past six months in the face of some very significant adverse shocks,' he said.

'But the strength of the economic expansion that is under way remains to be clarified. Some of the forces that have weighed heavily on the economy over the past year or so have begun to dissipate, but other factors, such as the sharp increase in world oil prices, have arisen that pose new challenges. As a result, the course of final demand will need to be monitored closely.'