ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Wednesday, November 13, 1996 TAG: 9611130070
SECTION: BUSINESS PAGE: B-5 EDITION: METRO
DATELINE: WASHINGTON
SOURCE: MARTIN CRUTSINGER ASSOCIATED PRESS
Alan Greenspan's gamble appears to be paying off.
The Federal Reserve chairman advocated holding off raising interest rates in September, hoping the economy would slow and keep inflation in check. Statistics suggest that is what is happening. Growth is slowing and wage and price pressures seem to be moderating.
Favorable statistics have sent financial markets to record highs and led many economists to predict the central bank will leave interest rates alone well into 1997. Central bank policy-makers will meet today.
``This is a no-brainer in terms of predicting no change in Fed policy,'' said David Jones, chief economist at Aubrey G. Lanston & Co. in New York. ``The elusive soft landing that Greenspan was forecasting is here.''
The view was far different when the Federal Open Market Committee, composed of Fed board members in Washington and Fed regional bank presidents, met Sept.24.
Before that session, analysts thought the Fed would raise interest rates to prevent inflation. Economists said unemployment had dipped to a seven-year low of 5.2 percent, with overall economic growth of 4.7 percent.
Since then, however, growth has slowed to 2.2 percent while wage and inflation pressures have moderated.
The FOMC has a final 1996 meeting Dec.17 and then does not meet again until Feb.4..
``I don't see anything happening through the rest of this year that would make the Fed want to tighten,'' said Allen Sinai, chief global economist at Primark Decision Economics in New York.
Even if inflation worries do cause the Fed to tighten, Sinai said he didn't see anything worse than a half-point increase in the federal funds rate, the interest that banks charge on overnight loans, which has been at 5.25 percent since Jan.31.
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