It Would Take a Lot For Fed to Raise Rates
WASHINGTON -- The U.S. economy is expanding at better than a 3% clip. The pool of workers sitting on the sidelines is evaporating. Unions finally are showing signs of life. Wage and benefit costs may be turning up. Boeing Co. can't make planes fast enough. The nation's railroads can't make timely deliveries. Business executives appear dangerously euphoric and, at least until last week, so did stock-market investors. What more will it take for Alan Greenspan to pull the interest-rate trigger?</br></br>A lot, apparently.</br></br>There is little doubt Federal Reserve officials would fall in line if Mr. Greenspan opened their Nov. 12 meeting by calling for higher rates, a step he hasn't taken since March. The published summary of the Fed's August meeting, the most recent available, is full of fretting about "the risks of rising inflation."</br></br>Other Fed officials caution that when things look too good to be true, they probably are. "The economy's performance over the last year or so-the extraordinary combination of above-trend growth, exceptionally tight labor markets, but continued low inflation-has been much more favorable than I and many others expected," Alfred Broaddus, president of the Federal Reserve Bank of Richmond, Va., said the other day. "Speaking strictly for myself, I am doubtful it can continue indefinitely."</br></br>All this is irrelevant if the stock market crashes. The Fed flooded the economy with credit after the 1987 crash and surely would do so again.