Greenspan Hints at Raising Interest Rates Soon

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WASHINGTON: Federal Reserve Chairman Alan Greenspan, whose public comments can shake world markets, sent a clear signal Tuesday that the central bank stands ready to raise interest rates in the first half of this year. He praised the U.S. economy's healthy growth in 1996, but reiterated concerns about rising wage demands caused by a tightening job market. Appearing before the Senate Budget Committee, Greenspan said inflationary pressures had not yet become evident even though the country is in its third longest recovery in history. "At some point in the future, the tradeoff of subdued wage growth for job security has to come to an end," he warned, indicating that inevitable wage increases would fuel inflation and force the interest rate increases. "It might happen in March or in April. The point is it's going to happen," says TIME's Bernard Baumohl. The last time Greenspan spoke out he created a shortlived stampede in global financial markets by saying that stock prices were driven up by "irrational exuberance," a remark that panicked investors who assumed he was about to raise rates. This time, Greenspan's cautiously worded warning shot did not impress Wall Street, where stocks kept rising. -Steffan Heuer