Economic Outlook to Come into Focus Gradually says Greenspan

WASHINGTON – In his testimony to the House Financial Services Committee Federal Reserve Chairman Alan Greenspan was cautiously optimistic about the economy. He said the trends shaping the financial outlook will become more evident as economic tensions associated with the war in Iraq further unwind. “Unfortunately, the future path of the economy is likely to come into sharper focus only gradually,” said Greenspan. The Chairman noted that six weeks after the beginning of the war information on economic conditions has been mixed. He said while the consumer confidence readings for April rebounded, businesses have not shown a similar improvement in mood. “Consistent with this, the persistent high level of new claims for unemployment insurance suggest that firms may still be finding it possible to meet their customers’ tepid increase in demand with a leaner workforce,” said Greenspan. He said businesses should see some relief from the pressure on profit margins caused by sharp increases in energy prices in recent months. Greenspan made no specific comments on whether the Federal Open Market Committee will decide to lower key interest rates at its next meeting. The committee last lowered rates at its November 6 meeting to a federal funds target rate of 1.25%-the lowest in more than 40 years.