Fed chair says there's no plan for rate cuts

WASHINGTON - Federal Reserve Chairperson Alan Greenspan told Congress yesterday there is no current plan for a coordinated cut in interest rates by the central banks of major industrial countries to spur slowing world economic growth.

Greenspan didn't rule out rate cuts, either by the Fed alone or in concert with other central banks, if the turmoil in global financial markets, which has spilled over into U.S. markets, threatens continued U.S. economic growth.

The next meeting of Fed policymakers is Sept. 29, but Greenspan's comments and those of numerous other central bank officials suggest that a rate cut at that meeting is unlikely. Greenspan's counterpart in Germany, Hans Teitmeyer, president of the Bundesbank, said this week he sees no need for a cut in his country's interest rates.

The Fed chairperson characterized the U.S. economy as "still strong," but added, "there are the first signs of erosion at the edges, especially in manufacturing." In testimony before the House Banking Committee, he also said the financial crises in East Asia and Russia also have boosted interest rates being paid by some borrowers in this country, which will tend to slow growth.

A Fed reduction in short term rates would lower the costs of borrowing for businesses and consumers, which would tend to encourage spending and economic growth.

Although some traders had hoped for stronger hints of a rate cut, Wall Street generally had a subdued reaction to Greenspan's remarks. The Dow Jones industrial average ended up 65.39 points at 8,089.78.

Treasury Secretary Robert Rubin, who also testified before the committee, agreed that the U.S. economy is strong. But he noted that American exports to Japan and other nations with economies that have been hurt by the turmoil have been falling and that U.S. corporate profits are under pressure.

09-17-98