WASHINGTON -- Wayne Angell, the new chief economist of Bear, Stearns & Co. and former Federal Reserve governor, predicted Friday that the Federal Open Market Committee will raise the federal funds rate by another half percentage point to 4.75% at its next meeting on Aug. 16.
Angell made the prediction while chatting with reporters in the hearing room where Fed chairman Alan Greenspan was about to deliver round two of his semiannual monetary policy report to a House Banking subcommittee.
In responding to questions from committee members, Greenspan reiterated his view that a stronger dollar is good for the U.S. economy.
He also expressed his general agreement with comments made Thursday by Treasury undersecretary Lawrence Summers that a strong dollar helps investor confidence in financial markets while curbing inflation in the United States.
"Obviously, it is a very complex issue. All I can say is that I would reiterate basically what undersecretary Summers said yesterday," Greenspan said. "A stronger dollar essentially helps the U.S. and our trading partners."
Greenspan acknowledged that the strength of the dollar relative to other currencies affects how the Fed sets monetary policy, but he said it is one of many considerations. "There are a number of other things we consider. We try to balance them," he said.
The Fed chairman also echoed what President Clinton has been saying lately: that economic fundamentals ultimately prevail in the setting of exchange rates. But Greenspan added that currency market interventions can be effective in certain short-term situations.
"In the broadest sense, economic fundamentals will determine where exchange rates will go over time," he said. "Nevertheless, there have been instances where there appears as though there was some temporary imbalance in the markets that we could effectively counter."