NEW YORK — Federal Reserve chairman Alan S. Greenspan warned today that financial markets are vulnerable to further shocks from the U.S. budget deficits, downplaying the role that the Fed can play if fiscal authorities are irresponsible.
But his remarks to the National Council of Savings Institutions gave no clear sign whether the Fed has tightened credit to boost the dollar, as speculated in the financial amrkets in recent days.
Greenspan said careful money supply policies are needed to foster economic growth, but only in concert with financial discipline.
"Prudent monetary policy is not a sufficient condition for a stable, noninflationary financial climate," he said, "Fiscal policy must also play a role."
The Fed chairman, whose words are being closely monitored to determine monetary policy in the aftermath of the October stock market crash, said the central bank was doing its part to keep the economy on an even keel.
