Attack Impact on Economy Unclear, Greenspan Says

Federal Reserve Chairman Alan Greenspan told the Joint Economic Committee of Congress Wednesday that it is too early to tell what impact the terrorist attacks of Sept. 11 will have on the U.S. economy.

However, news services reported, he said the long-term prospects for the economy remain strong.

e did not discuss the prospect of further interest rate cuts. The Fed has trimmed rates a full percentage point since Sept. 11. The rate now stands at 2.5%, its lowest level since 1962.

Greenspan also predicted a one-time decline in the productivity of U.S. industry as companies begin coming to grips with the perception of higher risk, Bloomberg said

Greenspan told committee members that consumers and corporations have slowed their spending in the days and weeks following the attacks.

f importance to truckers, the Fed chairman said that if there are more attacks on the United States, demand for insurance could go so high that consumers and businesses may not be able to afford coverage, and the government may be forced to enter the reinsurance industry.

Great Britain and Israel already provide government reinsurance on insurance against violent attacks, Reuters reported.

The chairman said a capital gains cut, favored by many in Congress as part of a stimulus package, would not provide the immediate impact the economy needs, but he nevertheless said he supported a cut.

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