US economic growth picking up

US economic growth is picking up after hitting a soft patch earlier this year, and oil prices are so far not pushing inflation higher, Federal Reserve Chairman Alan Greenspan said.

“The most recent data suggest that on the whole the expansion has regained some traction,” Mr Greenspan said in prepared testimony to the House Budget Committee.

“Despite the rise in oil prices through mid-August, inflation and inflation expectations have eased in recent months,” he said.

Crude prices have fallen over the past two weeks. It traded at $43.31 a barrel yesterday morning. Still, oil prices, which hit a dollar record $49.40 a barrel on August 20, may rise again, he said.

“The growing concerns about long-term supply, along with large prospective increases in demand from the rapidly growing economies of China and India, both of which are expanding in ways that are relatively energy-intensive, have propelled prices of distant futures to levels well above their ranges of recent years,” Mr Greenspan said.

His remarks suggest the Fed’s policy-making Open Market Committee is likely to stick to its plan of raising interest rates at what it calls a “measured pace.”

In a statement after their August 10 meeting, committee members said the economy “was poised to resume a stronger pace of expansion going forward.” The next policy meeting is September 21.

The Fed’s overnight bank lending rate, the benchmark for interest rates throughout the US economy, stands at 1.5%. Federal funds futures contracts for October delivery trade at 1.74%, showing traders expect the US central bank will raise rates again this month.

Dallas Fed Bank President Robert McTeer said yesterday the current rate is still negative in inflation-adjusted terms.