Two Economists Rate Fed's Alan Greenspan

Article excerpt

HOW is Alan Greenspan doing as head of the Federal Reserve?

"I would be complimentary on several scores," says David Munro, United States economist for High Frequency Economics, a New York consulting firm that provides daily economic research to some 200 institutions in 22 nations. Mr. Munro particularly approves of the Fed's efforts to keep monetary policy on "an even keel."

Since Mr. Greenspan became chairman in June 1987, Munro says, the central bank has avoided in some degree the economic booms and busts that troubled the 1960s, 1970s, and the first half of the 1980s. Though there was a recession in 1990-91, unemployment peaked at 7.7 percent, well below the 11 percent of the previous slump in 1981-82. The Fed has "minimized" the risk of its monetary policy being a source of economic instability.

The Fed, he says, "has managed to run a smoother economy."

Leif Olsen, a New Canaan, Conn., money manager and former chief economist for Citibank, is more critical. The Fed's policy moves, he says, were "not timely enough" to prevent either the last recession or the lackluster recovery since then.

Both economists, however, hold that the Fed's current monetary policy is about right. Nor do they figure the policymaking Federal Open Market Committee shifted its monetary stance when it met earlier this week. FOMC policy decisions aren't usually announced for a month.

"The Fed is expansionary enough," Mr. Olsen says. But he does find "a little troubling" the fact that the economy has not yet exhibited a strong, self-sustaining recovery in the areas of income, employment, and demand for goods and services.

Munro notes that the economy is growing today, not stalling as it was in 1990. Nor is higher inflation a threat requiring Fed action. He notes that consumer price inflation is running at a 2.8-percent rate this year, just under the 2.9 percent inflation of 1992. The inflation "hawks" among Fed policymakers have "piped down" on the need for higher interest rates. Munro forecasts a 2.8-percent real growth rate by year end.

During his last testimony to Congress in July, Greenspan was overly optimistic in his forecast of national output numbers. …