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Fed chief makes no waves
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November 2, 1999: 1:44 p.m. ET
Greenspan does not discuss interest rates in address to bankers group
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NEW YORK (CNNfn) - Rising house prices have a bigger influence on consumer spending than that of rising stock prices, Federal Reserve Chairman Alan Greenspan said Tuesday.
Greenspan, speaking to a conference of community bankers in Orlando, Fla., via satellite link from Washington, offered no insights into his current thinking on the U.S. economy or the outlook for interest rates, just two weeks ahead of a crucial Fed meeting on borrowing costs.
"The general experience of homeowners is a modest, but persistent, rise in home values that is perceived to be largely permanent," he said. "This experience contrasts markedly from volatile and often-ephemeral gains in stock market wealth."
He added that, because of demographic trends, new home sales were likely to slow, while the rate of growth of existing home sales was expected to decline, suggesting those effects taken together could dampen U.S. consumer spending somewhat.
Consumer spending accounts for some two-thirds of economic activity in the United States, and has been the driving force behind the more than eight-year-old expansion.
Greenspan steered clear of discussing the U.S. economy in detail, other than describing it as "healthy" and saying job growth was "robust." He previously has warned that high-flying U.S. stock prices warrant more attention by the Fed because of their impact on consumer spending, suggesting that a fall in equity prices from their current lofty levels could hurt the overall economy.
Greenspan's speech had been keenly awaited in financial markets for any hints on what the U.S. central bank will do about interest rates at a monetary policy meeting scheduled for Nov. 16. He does not have any other public appearances scheduled before then.
A slim majority of Wall Street analysts expects the Fed to opt for a third and final boost in borrowing costs this year, according to a poll conducted by Reuters. But the absence of any clear warnings by Greenspan that he will raise rates in November prompted many in financial markets to be cautious about the meeting's outcome.
The Fed chairman and his fellow policy makers usually like to telegraph their intentions well ahead of time to avoid surprises that could prompt outsized market reactions.
Stocks and bonds didn't post any telltale reaction to Greenspan's remarks. By midday, however, the Dow rose more than 90 points, the tech-heavy Nasdaq crossed the record 3,000-mark and the 30-year benchmark Treasury bond gained 9/16 to 99-25/32. Its yield, which moves inversely to the price, fell to 6.13 percent from 6.18 percent Monday.
-- from staff and wire reports
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