Credit crunch will weigh on U.S. growth: Greenspan
WASHINGTON (Reuters) - The tightening of credit markets around the world will slow future U.S. economic growth even though credit conditions have improved, former Federal Reserve Chairman Alan Greenspan said on Monday.
"Even though the credit crunch is easing, it is residual," he said in an interview on CNBC television.
The impact tighter credit has had on borrowing costs "is going to slow this economy down to a certain extent," he said. The effects of that slowing are likely to last into the first quarter of 2008, Greenspan said.
Greenspan suggested that monetary policy-makers may need to give greater weight to the rising costs of energy and food products when looking at inflation.
Central bankers in the United States have tended to focus on measures of "core" inflation that exclude food and energy costs in assessing inflation because those prices are widely considered volatile.
"The notion of looking at a core price requires that energy and food have no long-term trend and that their fluctuations are essentially random. That is now becoming an increasingly questioned premise," Greenspan said.
