Greenspan Gives Congress a 'Solid' Report

The oracle of the American economy, Federal Reserve chairman Alan Greenspan, spoke again on Tuesday, reporting to Congress in his usual dry abstruseness that the economy remains "solid" but that "after eight years of expansion, the economy appears stretched in a number of dimensions, implying considerable upside and downside risks to the economic outlook." Which means, says TIME senior economic reporter Bernard Baumohl, that Greenspan is "raising a yellow flag to indicate that the best of the nation's inflation news may be over. He wants everyone to know that the Fed stands ready and alert to raise interest rates, if that should become necessary."

Greenspan expects "no breakout of inflation," analyzes Baumohl, but he does believe it "could pick up a bit in 1999." One of the main reasons the Fed chairman cited for his prediction was what he called "worker depletion." Full employment has created a scarcity of labor in a number of sectors, explains Baumohl, and that shortage could cause a small rise in wage inflation this year. Having engineered one of the most remarkable economies of modern times, Greenspan now finds himself in the ironic position of working to ensure that success doesn't defeat itself.