Fed seeking to keep dollar at present rates

THE US Federal Reserve wants to keep the dollar at present rates as the White House pushes to keep it down.

US interest rates are still “fairly low” after six straight increases, Federal Reserve chairman Alan Greenspan said yesterday, warning that, despite the economy’s good health, fiscal discipline is vital. Financial markets took Mr Greenspan’s hotly awaited testimony to the Senate Banking Committee as confirmation that more interest-rate hikes lie ahead in a cycle that began in June, as well as a vote of confidence in the expansion.

IIB Bank chief economist Austin Hughes, after Mr Greenspan’s testimony, said the Fed chairman suggested further dollar losses could fuel higher inflation in the US. “So, the Fed, unlike the White House, is not seeking to push the dollar lower. “In addition, Greenspan again sounded reasonably relaxed about the outlook for the US external deficit. Today’s remarks were similar, if a little more restrained, than those made in his recent speech which sparked sharp dollar gains. We feel the testimony should offer support to the dollar both through Green-span’s specific currency comments and the promise of higher US interest rates.”