Despite recent hopes that the US economy has reached the bottom of its downturn, Federal Reserve chairman Alan Greenspan yesterday told the House Financial Committee there are few “concrete” indications of a rebound.

As part of his twice-yearly survey of monetary policy and the economy, Greenspan admitted that recent economic indicators have been mixed (as opposed to uniformly pessimistic), but he emphasised the continuing “sub-par economic performance”.

In a gloomier than anticipated statement, Greenspan announced that short-term interest rates may need to be cut again should the economy fail to improve: “[We] are not yet free of the risk that economic weakness will be greater than currently anticipated, and require further policy response.”

The Federal Reserve’s benchmark rate has been cut six times since the start of the year, from 6.5% (the highest rate in nine years) to 3.75% (the lowest in seven).

News source: Financial Times