Greenspan: Fed Interest Rate Hike May Be Necessary
Federal Reserve Chairman Alan Greenspan said yesterday that higher interest rates will be needed unless economic growth slows.</br></br>, Testifying before the Senate Banking Committee, Greenspan said ÛÏit is an open question" whether the central bank has raised interest rates enough this year to keep inflation under cfiptrol. Future increases would depend on whether economic growth moderates and whether the scattered signs that inflation pressures are growing become more widespread, he indicated.</br></br>From February to May, Fed policy makers raised short-term interest rates by 1.25 percentage points. Greenspan said Fed officials did not raise rates again when they met earlier this month because they ÛÏfaced considerable uncer-</br></br>Some analysts interpreted Greenspan's remarks to suggest that if recent evidence of slower growth continues to mount-such as yesterdayÛªs Commerce Department report that the number of housing starts fell 10 percent last month from a May level that was less than previously had been thoughtÛÓand inflation remains subdued, additional rate hikes could be delayed for months.</br></br>But other Fed-watchers and many investors and traders generally interpreted his testimony to mean higher rates are on the way, and that sent stock and bond prices lower. Both short-and long-term interest rates, which go up when bond prices go down, rose; rates on 30-year U.S. Treasury bonds jumped to 7.54 percent from 7.46 percent Tuesday. The Dow Jones in-