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No Fed Action on Interest Rates Seen : Financial Conditions 'in Relative Balance,' Greenspan Declares

February 16, 1988|Associated Press

WASHINGTON — Federal Reserve Board Chairman Alan S. Greenspan said today that financial conditions that influence interest rates "seem to be in relative balance" in the United States.

Greenspan's comments, made in a speech to the Bretton Woods Committee, appeared to suggest that no major Fed action on U.S. interest rates is imminent.

There has been speculation in recent days that the nation's central bank might be on the verge of easing credit through a lowering of its discount rate, the rate it charges banks and other financial institutions for direct loans.

Asked about interest rates, Greenspan said that "evidence of the most recent past" is in the direction of "emerging stability" in the economy of the United States and other industrial nations.

'Prospects ... Not Great'

"The relationships at the moment among all the major financial variables seem to be in relative balance," Greenspan said.

He said, however, that prospects for buoyant economic growth throughout the industrial world this year "are patently not great."

On another subject, Greenspan cited recent improvements in trade balances among the world's key trading partners and criticized treatment of the trade issue during the U.S. presidential primaries--in apparent criticism of campaign statements by Democratic contender Rep. Richard A. Gephardt (D-Mo.).

"The problem that I have with what's going on in Iowa is that there is a gross distortion of reality. I would scarcely recommend that the politics that were engaged in in recent weeks on this issue in Iowa be transplanted to this organization," Greenspan said.

Tough Stance 'Playing Well'

His comments were in response to a question from a member of the audience, former Sen. Charles H. Percy ( R-Ill.), who noted that Gephardt's tough trade stance seemed to be "playing well" in Iowa and some other primary states.

"And it ought to play well with this committee," Percy said.

The Bretton Woods Committee is a private organization formed to rally support in Congress for the World Bank and other international institutions.

Gephardt is the author of House-passed legislation calling for trade retaliation against Japan and other nations that maintain large trade surpluses with the United States through unfair trading practices.

World Bank Support

A "get tough" policy toward trading partners has been a central part of Gephardt's campaign.

Greenspan, meanwhile, voiced support for a proposal for a $75-billion increase in World Bank funds sought by bank President Barber B. Conable. Greenspan claimed that the increase is needed to help developing nations pursue sound economic policies.

Conable himself said the increase was desperately needed so the 151-nation lending organization could fight what he called "an abundance of absolute poverty."

"Without this adjustment, there is no future for many of these countries," Conable said.

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