Federal Reserve Board Chairman Alan Greenspan told Congress Thursday that the central bank will "act promptly and forcefully" at the first sign of inflation.
Mr. Greenspan, on Capitol Hill to deliver the Humphrey-Hawkins report, defended the recent hike in interest rates and said the economy remains healthy.
House Banking Committee Chairman Jim Leach noted that the law requiring the semi-annual reports is scheduled to expire Dec. 31, and said he will introduce legislation to ensure they are continued.
In response to numerous questions about tax cuts, Mr. Greenspan said the budget surplus should instead be used to pay down the government's debt. However, tax cuts are preferable to additional government spending, he said.
In response to a question, Mr. Greenspan said he still favors a provision in the financial reform bill that would bar commercial companies from entering the banking business by chartering thrifts.
Mr. Greenspan is scheduled to repeat his economic testimony July 28 before the Senate Banking Committee.