Greenspan warns on housing and oil

Speaking before a Congressional hearing today, Federal Reserve chairman Alan Greenspan painted a generally healthy picture of the US economy on Wednesday.

He issued warnings, however, about housing prices and oil prices that he said could slow economic growth. He especially expressed concern that oil prices could keep going up for the next few years and cut into private spending.

Mr. Greenspan added that political upheaval and rising oil demand in oil producing nations could cause export prices for oil to rise.

In his comments about housing prices, Mr. Greenspan warned that the bottom could drop out of housing prices in some markets where they had risen to levels that could be “unsustainable.”

While allowing that economic growth is currently good and that inflation rates are under control, Mr. Greenspan said that it will be necessary to “continue to remove monetary accommodation,” by which he means, most analysts believe, that interest rates will continue to rise.

Some analysts warn, however, that the Fed must be careful not to take its tightening measures too far.

Discuss this in the Finance Markets forums

Story link: Greenspan warns on housing and oil