Industry News

Fed chair Alan Greenspan froths on

Notes real estate market 'froth,' signals interest rate boosts

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The U.S. economy is in a period of expansion with low inflation that points to continued raising of interest rates, Federal Reserve Chair Alan Greenspan said in prepared testimony to the House Financial Services Committee today.   Greenspan cited three "significant uncertainties'' that could alter the Fed's outlook and policies: inflation, energy prices, and the behavior of long-term interest rates, which he called "especially surprising'' given the Fed's rate increases.   Low long-term rates are fueling a housing boom in the U.S., the Fed chairman said. That's creating "signs of froth" in some local markets where prices have risen to "unsustainable levels," he said, and "we certainly can not rule out declines in home prices, especially in some local markets."   Greenspan acknowledged that if declines were to occur, "they likely would be accompanied by some economic stress," though the Fed chair said he didn't think it would necessarily be major.   "Nationwide ba...