Fed Chairman Endorses Budget Agreement
Federal Reserve Cliairman Alan Greenspan lent his considerable endorsement to the bipartisan budget agreement yesterday, saying it would produce "a credible, enforceable reduction in the budget deficitÛ and lower interest rates.</br></br>Failure to pass it, he warned a House Government Operations subcommittee, Û÷would produce an adverse reaction in financial markets that could undercut the economy already significantly weakened by the shock of the Middle East crisis and problems in our financial system.Û</br></br>Later, Treasury Secretary Nicholas F. Brady issued a statement agreeing with Greenspan's interpretation, declaring, ÛÏItÛªs simple: If Congress passes the budget agreement, interest rates will go down. If they donÛªt pass it, interest rates will go up.Û</br></br>Greenspan and other Federal Reserve officials have indicated that if Buch n budget deal becomes law, they would act to lower shortterm rates, provided financial markets also responded favorably to the package. In his testimony, Greenspan said, "The initial reaction of financial markets has been quite positive, though perhaps restrained by criticism that seemed to make prospects for enactment less certain."</br></br>The FedÛªs own reaction has been restrained by the same doubts about enactment. Top Fed policy makers met Tuesday to set a course for monetary policy for coming weeks and most financial analysts believe