Fed Still Easing Credit Policy, Greenspan Says

Federal Reserve Board Chairman Alan Greenspan said today that the central bank is continuing to ease its credit policy in its latest efforts to fight off a potentially destructive economic recession.

“The easing has consisted of several steps, the most recent of which took place last week,” Greenspan told the Senate Banking Committee. The Fed easing began in early June.

Greenspan said he believes that the Fed’s monetary policy is on the right track and that the U.S. economy, which is slowing after a record seven years of strong expansion, will achieve a so-called soft landing and avoid a harmful recession.

“I think we will make it,” Greenspan told the committee.

Semiannual Report

Greenspan was delivering his semiannual Humphrey-Hawkins report to Congress on the Fed’s monetary policy and the outlook for the economy.

The Fed chairman said the economic information that the central bank has received to date points favorably toward a soft landing. He said he thinks the Fed has succeeded in diffusing inflationary pressures and was correct in deciding in early June to start lowering interest rates.

But he cautioned that the Fed will not know for sure well into 1990 whether its polices have worked.

“Whether that achieves the ideal configuration of economic activity that we are seeking, I think is not yet evident,” he said.