The central bank in January cut interest rates by a full percentage point in two moves, the biggest rate reduction in a single month in Greenspan's 13-year tenure at the Fed. He blamed much of the economy's weakness on an effort by businesses to cut back quickly on production in the face of falling sales. Businesses ended up with too much unwanted merchandise and they're in the process of unloading them. Greenspan cited signs for hope that the economy will emerge relatively quickly from the current weakness. He said the remarkable surge in productivity growth that began four years ago was continuing even as the economy slowed.
Higher productivity is the key factor supporting rising living standards.
He also said there is no evidence that the big jump in energy prices is causing inflation problems outside of that sector. The fact that inflation has remained subdued has allowed the central bank to move as fast as it has to cut interest rates to spur growth, Greenspan said. This material may not be published, broadcast, rewritten, or redistributed. The Associated Press and Retuers Ltd. contributed to this report. CBS Worldwide Inc. All Rights Reserved.