Senators Want Rates To Be Left Alone

Sen. Tom Harkin urged Federal Reserve Chairman Alan Greenspan and other Fed policymakers to hold back on any increase in interest rates until they see sure signs of accelerating inflation.

“My colleagues and I are sending a letter to Chairman Greenspan urging the Fed not to raise interest rates unless it can point to clear and specific signs of accelerating inflation,” the Iowa Democrat said at a press conference today. “We should fear inflation, not the ghost of inflation.”

Harkin was joined in his call by Sens. Bryon Dorgan, a Democrat of North Dakota, and Jack Reed, a Democrat from Rhode Island, and Rep. Maurice Hinchey, a Democrat from New York. They made their appeal at a press conference.

Federal Reserve spokesman Joe Coyne said that the Fed had not received the letter and would have no comment.

Harkin, a longtime critic of Greenspan’s economic policies, also criticized Greenspan’s comments made on two occasions in recent weeks suggesting that stock prices may have risen above sustainable levels based on earnings expectations.

Greenspan backed away from those statements in congressional testimony last week, saying that the rise in stock prices could continue if corporate earnings remain strong.

Still, Harkin maintained that Greenspan was “ill advised” in making those comments. “That’s not the role of the Fed chairman,” he said.

Harkin has long opposed a tight money policy, arguing that the U.S. economy can withstand a higher growth rate and that the Fed shouldn’t raise rates unless stronger signs of inflation emerge.

The former presidential candidate held up Greenspan’s Senate confirmation for a third term as Fed chairman for three days last year to highlight his opposition to the Fed’s economic policies.

Harkin says interest rates are too high, and that those rates slow growth and keep wages unnaturally low. He says international competition will keep wages and inflation in check, allowing the Fed to ease rates to spur a faster growth rate.

The Fed’s policymaking committee meets March 25 to decide whether to raise the Fed’s overnight bank lending rate.