Thursday, September 17, 1998 Published at 02:59 GMT 03:59 UK
Business: The Economy
Rate cut hopes fade
US Federal Reserve Chairman Alan Greenspan failed to reassure markets
US Federal Reserve Bank Chairman Alan Greenspan has said there is no effort under way to launch a co-ordinated round of interest rate cuts among major countries to deal with the worsening global financial crisis.
"I can safely say that at the moment there is no endeavor to co-ordinate interest rate cuts," he said.
Mr Greenspan's comments disappointed traders and caused shares to fall in New York, before a late rally inspired by President's Clinton's comments that he is determined not to resign.
Hopes of US rate cuts have buoyed stock markets around the world over the last few days.
However, Mr Greenspan did not rule out a co-ordinated rate cut in the future, saying that US officials are staying in close touch with other industrialised countries.
Mr Greenspan could also look to lower US rates in due course as the global financial crisis takes its toll on domestic growth.
In testimony to the US lawmakers, Mr Greenspan called for countries to abandon attempts at exchange controls as a means of dealing with the global financial crisis.
He said that the free flow of capital was necessary to preserve long-term growth prospects.
Mr Greenspan said that the failure of domestic financial systems was now transmitted worldwide more quickly, but these needed more transparency, not isolation from the world economic system.
But he said that there had not been "due diligence" by foreign investors who were influenced by high equity prices in the US, and by some foreign borrowers.
Call for more IMF funds
Meanwhile, the US Treasury Secretary Robert Rubin praised the work of the IMF in reducing the impact of the financial crisis and called on Congress to fully fund the IMF.
So far the House of Representatives has blocked approval of its requested quota increase.
The IMF has come under a barrage of criticism in the wake of the economic crises in Asia and Russia, most recently by the United Nations Conference on Trade and Development or UNCTAD.
In its annual report, it says the IMF was mistaken in rejecting the idea of setting up a special fund to tackle economic difficulties in Asia.
It warns that the world economy is on a knife-edge and could go into a full-blown recession, unless urgent action is taken in Europe and Asia.
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