Fed Officials Can’t Stifle Smiles Central Bank Executives Say U.S. Economy Is In ‘Exceptional’ Shape

U.S. Federal Reserve officials, normally cautious in their pronouncements, all but gushed over the U.S. economy in three separate congressional hearings this week - leaving no doubt they see no need for U.S. borrowing costs to rise any time soon.

Fed Gov. Laurence Meyer told the House Banking Committee “the performance of this ‘good news’ economy is enough to make you want to cheer.” His remarks came as Fed Chairman Alan Greenspan, in testimony before the Senate Banking Committee, repeated his conclusion from Tuesday that the U.S. economy is “exceptional.”

Pointing to strong growth, low inflation, soaring equity prices and record levels of consumer confidence, Meyer said, “recent economic performance has been extraordinarily favorable.”

While members of the Fed’s policy-making Open Market Committee reminded lawmakers Wednesday they could still take the punch bowl away if things get too exuberant, for now they seem to have joined the party.

“All the current signs point to continued economic expansion for the rest of this year and into the next,” said Fed Vice Chairman Alice Rivlin. “The economy as a whole is functioning amazingly well.”

If productivity gains continue and inflation remains tame, growth will continue and “from the Federal Reserve’s point of view, the faster the better,” Greenspan said again in the second day of his twice-yearly Humphrey-Hawkins report to Congress on the economy and Fed policy.

The Fed’s outlook continued to delight investors. A day after the Dow Jones Industrial Average surged 155 points following Greenspan’s opening day testimony, the 30-stock index rose 27 more points Wednesday to 8,088.36, a second straight record close.