Federal Reserve Chairman Alan Greenspan told Congress today (Feb. 28) that the current economic slowdown “has yet to run its full course,” which suggests the Fed will lower interest rates again.
Also today, the Commerce Department reported the nation’s economy grew at only a 1.1% rate during the fourth quarter of last year, the slowest pace in more than five years.
In comparison, the economy grew at an 8.3% rate during the fourth quarter of 1999, a rate most economists consider unsustainable and inflationary.
Greenspan told the House Financial Services Committee that businesses shrinking inventories played a major role in slowing the pace of economic growth.
Higher interest rates imposed by the Fed late in 1999 and early 2000 encouraged businesses, including RV dealers, to shrink their inventories.
The Fed chairman added that excess inventories “built up in 1999 and 2000 have engendered a retrenchment that has yet to run its full course.”
Consequently, Greenspan said he continues to be more worried about a recession, rather than inflation. A year ago, the Fed chairman was more worried about inflation, which is why the Fed raised rates at that time.