Greenspan Acknowledges Potential for Excessive Slowdown

Fed Chairman Alan Greenspan acknowledged in a speech today that the combination of high energy prices, falling stock prices and rising interest rates for private borrowers has the potential to slow the pace of economic growth too much. His words suggest that the Fed will lower interest rates in the months ahead.

"[I]n an economy that already has lost some momentum," Greenspan said, "one must remain alert to the possibility that greater caution and weakening asset values in financial markets could signal or precipitate an excessive softening in household and business spending."

In his first speech on the economy and monetary policy since Oct. 19, Greenspan dwelt on the forces that have caused economic growth to slow and have the potential to slow it even more.

The 50% rise in oil prices this year, from about $20 a barrel in January to about $30 recently, is key, Greenspan said. ...