Mr Alan Greenspan, the chairman of the US Federal Reserve, yesterday played down the possibility of a concerted move by the world's leading central banks to cut interest rates to stop the spread of the global financial crisis.
"At the moment there is no endeavour to co-ordinate interest rate cuts," Mr Greenspan told a special hearing of the House of Representatives' Banking Committee on the international economic turmoil.
But the Fed chairman said the central bank officials of the Group of 10 leading industrial nations were in "fairly extensive conversations" about international financial conditions. His speech came as it emerged that the International Monetary Fund will reveal next month that it has reduced its forecast for international economic growth this year from 3.1 per cent to 2 per cent.
Mr Greenspan gave no repeat of his hint earlier this month that the US central bank was prepared to loosen monetary policy if international conditions deteriorated further. But he said that while the Fed's primary concern remained the condition of the domestic US economy, the impact of the problems in international markets was something it had to consider.
"While our actions must be focused on the American economy, there is no way we can do that without reference" to what was going on in the rest of the world, he said, responding to questions about the outlook for US monetary policy. The Dow Jones Industrial Index, which had gained ground before Mr Greenspan's comments on expectations of a rate cut, fell after he played down concerted action. It was down 37.33 points at 7,987.06 at 2.25 p.m. New York time. It later closed up 65.39 on 8089.78.
Many financial market economists had been hoping Mr Greenspan would give a clear indication that the US was prepared to cut interest rates soon, but in his prepared remarks, the Fed chairman made no mention of monetary policy. The Fed's policy-making open market committee next meets on September 29th and some analysts believe that if a rate cut was likely at that session, Mr Greenspan would have signalled it yesterday.
