Greenspan Sees End of Recession

Federal Reserve chairman Alan Greenspan sought to boost confidence in the US economy yesterday when he promised to keep interest rates low for as long as it takes to restore growth.

In testimony to Congress, Mr Greenspan painted a glowing picture of an economy poised to recover from the recession that began in 2001, and embark on "a period of extended growth". But the Fed "stands prepared to maintain a highly accommodative stance of policy for as long as needed to promote satisfactory economic performance".

Borrowing costs in the US are already at their lowest level since 1958, after the Fed made a 0.25% cut in interest rates at its meeting on June 25, taking them to 1%. News that retail sales were up 0.5% in June - the strongest performance for three months - helped lend support to Mr Greenspan's view yesterday. The pound lost more than 1% against a buoyant dollar after his remarks, to trade just below $1.60.

The Fed chairman did highlight some risks to the health of the economy, admitting that wobbly corporate confidence was still holding firms back from new spending. "A sense of caution reflecting, in part, the aftermath of corporate governance scandals appears to have left businesses focused on strengthening their balance sheets and, to date, reluctant to ramp up significantly their hiring and spending."