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Fed chief talks output
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June 13, 2000: 1:41 p.m. ET
Greenspan comments on productivity and technology, not economy
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NEW YORK (CNNfn) - Productivity should continue to rise because of advances in technology that have allowed companies to get more output per hour from their workers, something that has kept costs and prices from rising, Federal Reserve Chairman Alan Greenspan said Tuesday
 In a speech that made no mention of the current state of the economy, Greenspan spoke of the rapid advances in technology, particularly strides in information technology and development, which have allowed the U.S. economy to grow at an above-normal rate for more than five years without sparking any kind of significant inflation pressures.
At the same time, the Fed chief cautioned that some of the advances in productivity may have more to do with the progress of the economy, now in its ninth and record year of uninterrupted growth, than with development of different types of technology -- something that could stifle productivity gains down the road.
"...most of the gains in the level and the growth rate of productivity in the United States since 1995 appear to be structural, largely driven by advances in technology and its application -- irreversible in the sense that knowledge once gained is almost never lost," Greenspan told the New York Association for Business Economics via satellite from Washington. At the same time, "some of the increase in output per hour may well reflect cyclical rather than structural changes," he said.
No hints from Alan
"His conclusion, in essence, is that much of the productivity explosion of recent years is permanent, but there is a risk that there is significant cyclical element too," said Ian Shepherdson, chief U.S. economist with High Frequency Economics. "Unfortunately, this leaves us none the wiser as to his intentions at the next (Federal Open Market Committee) meeting."
Greenspan's remarks, the first since the Fed raised its benchmark short-term lending rate by a half-point, made no mention of the current state of the economy, particularly of recent reports including one Tuesday on May retail sales that have shown a noteworthy slowdown in economic activity. The Fed's policy setting arm, the Federal Open Market Committee, next meets June 27-28.
 Financial markets registered no reaction to Greenspan's comments, with both the Dow Jones industrial average and Nasdaq composite index hovering in negative territory in mid-afternoon trading. Neither did Treasury bonds, with the 30-year bond down almost a point in price.
The markets did react to comments by another Fed board member, Fed Bank of New York President William McDonough, who warned in remarks at the College of St. Rose in Albany, N.Y., earlier Tuesday that it would be premature to assume that U.S. inflation won't flare up in the months ahead.
It would be "foolish" to "declare victory" over inflation, McDonough said. "There is no question that the U.S. economy, especially in relation to the world economy, is beginning to exhibit signs of imbalance and strain." 
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U.S. Federal Reserve
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