Greenspan Says Inflation's Pace Isn't Increasing
WASHINGTON -- Federal Reserve Board Chairman Alan Greenspan said that inflation isn't accelerating and that the economy is doing better than most forecasters predicted.</br></br>In a speech to a group of business executives, Mr. Greenspan said recent interest rate increases in the financial markets reflect fears of a pickup in inflation, conceding that there is "an implicit rise in the inflation rate embodied in long-term (interest) rates." But he restated his view that the markets are expecting something that is in the "lower probabilities" of the likely outcomes.</br></br>The Fed chief said that signs of shortages that would lead to a pickup in inflation are likely to show up first in a lengthening of the delivery times for raw materials. Such delays aren't showing up across the board, he said, indicating that the economy isn't "approaching full capacity."</br></br>He said that a recent "dramatic rise in steel scrap prices" and higher prices for other commodities reflect increased demand as the basic industrial sector of the economy revives, rather than an acceleration in inflation.</br></br>Mr. Greenspan said this revival has been due partly to an "extraordinary shift currently under way" in the nation's trade balance, as exports rise and domestic producers gain an increasing share of the U.S. market. He conceded that the turnaround still hasn't shown up in the nominal trade figures, as higher import prices continue to push up the dollar value of the nation's import bill.