US Federal Reserve Chairman Alan Greenspan removed a major obstacle to a rise in interest rates on Monday, declaring the end of a near year-long deflationary threat.
Banks were prepared for rising rates, he said.
"It is apparent that pricing power is gradually being restored," Greenspan told a Senate Banking panel.
"Threats of deflation, which were a significant concern last year, by all independent indications are no longer an issue before us," the powerful 78-year-old central bank chief said.
"Clearly, it is a change that has occurred in the last number of weeks and it is a change, as best I can see, that has been long overdue and most welcome," he said.
It was his first clear pronouncement of the death of the deflation risk, removing one of the biggest obstacles lying between the Federal Reserve and a rise in near rock-bottom interest rates.
Federal Reserve policymakers have cited the threat of deflation for 11 months.
The risk, though minimal, of a broad decline in consumer prices was judged to be so grave that it justified keeping key short-term interest rates at the lowest level since 1958 for the past 10 months.
But official figures showed core consumer prices rose 0.4 percent last month, the steepest increase in underlying inflation in three years.
The prospect of an economy-cooling rise in interest rates spooked investors, sending the Dow Jones industrial average tumbling 123.35 points, or 1.18 percent, to 10,314.50.
The dollar, which attracts buyers when returns are boosted by higher rates, strengthened. The euro dropped to US$1.1858 in the afternoon from US$1.2023 late Monday.
Greenspan was speaking amid feverish worldwide speculation that he may soon decide to lift the key federal funds rate, which banks charge each other, from 1 percent.
Some investors fear banks and major financial institutions would be hurt by such a move.
But Greenspan said the data showed that the banking industry was adequately managing its interest rate exposure.
"Many banks indicate that they now either are interest-rate neutral or are positioned to benefit from rising rates," he said.
Some economists say the Federal Reserve may raise rates as soon as June if consumer prices keep rising and if employers sustain a recent spurt in jobs creation.
Policymakers had cut the federal funds target rate 13 times since January 2001, when it stood at 6.5 percent, to counteract the Internet bubble, Sept. 11, 2001 attacks, corporate scandals and the US-led Afghan and Iraq wars.
Super Typhoon Kong-rey is the largest cyclone to impact Taiwan in 27 years, the Central Weather Administration (CWA) said today. Kong-rey’s radius of maximum wind (RMW) — the distance between the center of a cyclone and its band of strongest winds — has expanded to 320km, CWA forecaster Chang Chun-yao (張竣堯) said. The last time a typhoon of comparable strength with an RMW larger than 300km made landfall in Taiwan was Typhoon Herb in 1996, he said. Herb made landfall between Keelung and Suao (蘇澳) in Yilan County with an RMW of 350km, Chang said. The weather station in Alishan (阿里山) recorded 1.09m of
NO WORK, CLASS: President William Lai urged people in the eastern, southern and northern parts of the country to be on alert, with Typhoon Kong-rey approaching Typhoon Kong-rey is expected to make landfall on Taiwan’s east coast today, with work and classes canceled nationwide. Packing gusts of nearly 300kph, the storm yesterday intensified into a typhoon and was expected to gain even more strength before hitting Taitung County, the US Navy’s Joint Typhoon Warning Center said. The storm is forecast to cross Taiwan’s south, enter the Taiwan Strait and head toward China, the Central Weather Administration (CWA) said. The CWA labeled the storm a “strong typhoon,” the most powerful on its scale. Up to 1.2m of rainfall was expected in mountainous areas of eastern Taiwan and destructive winds are likely
The Central Weather Administration (CWA) yesterday at 5:30pm issued a sea warning for Typhoon Kong-rey as the storm drew closer to the east coast. As of 8pm yesterday, the storm was 670km southeast of Oluanpi (鵝鑾鼻) and traveling northwest at 12kph to 16kph. It was packing maximum sustained winds of 162kph and gusts of up to 198kph, the CWA said. A land warning might be issued this morning for the storm, which is expected to have the strongest impact on Taiwan from tonight to early Friday morning, the agency said. Orchid Island (Lanyu, 蘭嶼) and Green Island (綠島) canceled classes and work
KONG-REY: A woman was killed in a vehicle hit by a tree, while 205 people were injured as the storm moved across the nation and entered the Taiwan Strait Typhoon Kong-rey slammed into Taiwan yesterday as one of the biggest storms to hit the nation in decades, whipping up 10m waves, triggering floods and claiming at least one life. Kong-rey made landfall in Taitung County’s Chenggong Township (成功) at 1:40pm, the Central Weather Administration (CWA) said. The typhoon — the first in Taiwan’s history to make landfall after mid-October — was moving north-northwest at 21kph when it hit land, CWA data showed. The fast-moving storm was packing maximum sustained winds of 184kph, with gusts of up to 227kph, CWA data showed. It was the same strength as Typhoon Gaemi, which was the most
RSS