The Federal Reserve does not plan to cut interest rates again anytime soon to boost economic growth because action already taken should be sufficient, Fed Chairman Alan Greenspan told Congress Wednesday.
While the situation "needs to be monitored closely," Greenspan said interest rate reductions in recent months should spur the economy and that "the early indications of a marked pickup in residential real estate activity and a rise in retail sales are a particularly favorable sign."The Fed expects "a moderate upturn in economic activity during 1992 although . . . the outlook remains particularly uncertain," Greenspan said in his prepared statement.
While the Fed sees a "moderate reacceleration of (economic) activity," the Fed in its semiannual monetary policy report to Congress said that "the pace of expansion this year is expected to remain weaker than in previous business cycle recoveries."
The Fed believes "that with the easing of monetary conditions to date, providing considerable impetus to the economy, the most likely outcome is for a moderate reacceleration of activity" this year, with a continued price stability.
"There are reasons to believe that business activity will pick up," Greenspan said, noting that there are "clear signals that core inflation rates are falling," a positive sign of future gains in living standards.
"Gains in employment are expected to come slowly," the Fed chairman warned.
The Fed's cautiously optimistic economic outlook envisions real growth in the gross domestic product to rise between 1.75 percent and 2.5 percent from the fourth quarter of 1991 to the same quarter of 1992, about the same as the Bush administration's 2.2 percent growth estimates.