By Agence France-Presse Federal Reserve Chairman Alan Greenspan said July 20 the U.S. economy is in a broad, jobs-rich expansion and that he cannot rule out steeper-than-expected interest-rate increases. "Not only has economic activity quickened, but the expansion has become more broad-based and has produced notable gains in employment," Greenspan told a Senate banking panel as he delivered the central bank's semiannual economic outlook. Strengthening demand, coupled with "transitory" factors such as sizzling energy prices, has pushed up inflation, which in turn has led to a softness in the critical economic engine of consumer spending. That softness "should prove short-lived," the central bank chief said. "With the growth of aggregate demand looking more sustainable and with employment expanding broadly, the considerable monetary policy accommodation put in place in 2001 is becoming increasingly unnecessary." Financial markets, households, and businesses appeared "reasonably well prepared" for the transition to higher interest rates, Greenspan said. Greenspan, who presented Congress with a semiannual economic report by the Federal Reserve, painted a relatively robust economic outlook. In the report, the central bank only slightly trimmed a 2004 economic growth forecast. The new forecast calls for 2004 real gross domestic product to expand in a range of 4.5% to 4.75%, down from a previous forecast in February for growth of 4.5% to 5%. The report predicted more moderate real GDP growth of 3.5% to 4% for next year. Prices paid by consumers, excluding food and energy, should rise by 1.75% to 2% this year, and 1.5% to 2% in 2005, the report said. Copyright Agence France-Presse, 2004
