MercoPress. South Atlantic News Agency

Greenspan anticipates oil-spurred higher interest rates.

United States Federal Reserve chairman Alan Greenspan said this Tuesday he was concerned with a general rise in US consumer prices if oil prices continue to soar, and consequently did not exclude a higher than expected rise in interest rates.

"High prices of oil, if they persist, could push consumer prices as well as the whole level of prices", indicated Mr. Greenspan addressing a bankers' video conference in London.

Mr. Greenspan said that fears of deflation "had passed" and insisted interest rates will have to return to more normal levels after a long period of extremely low rates.

However he pointed out that the change in monetary policy will occur probably "at a measured rhythm", but if the assessment is wrong "the Fed is ready to make all that is needed to accomplish our commitment with price stability in such a manner it ensures sustainable economic growth".

US dollar basic interest rates are at their lowest since 1958 and market analysts expect the Fed to take them from 1% to 1,25% in the next monetary council meeting scheduled for June 30.

"Recent modest drops in oil and natural gas prices could or could not, be indicating a tendency, but anyhow they are welcome". "The persistent energy prices increase is a worrisome element in the costs field", insisted Mr. Greenspan but he also added that investors will at any moment, arrive at the oil equilibrium price. "When that occurs, demand will cease to grow, taking pressure off prices", argued the Fed chairman who forecasted that consumer prices increase would be limited by "a deceleration of corporations' profits".

"Fear of loosing clients will dissuade corporations from passing on the full impact of costs to consumer prices", and eventually "competitive market forces will limit profit margins taking them to more normal levels", concluded Mr. Greenspan.