however, given the substantial gains in house prices and the high levels of home construction activity over the past several years, prices and construction could decelerate more rapidly than currently seems likely. slower growth in home equity, in turn, might lead households to boost their saving and trim their spending relative to current income by more than is now anticipated. the possibility of significant further increases in energy prices represents an additional risk to the economy ; besides affecting inflation, such increases might also hurt consumer confidence and thereby reduce spending on non - energy goods and services. although the outlook contains significant uncertainties, it is clear that substantial progress has been made in removing monetary policy accommodation. as a consequence, in coming quarters the fomc will have to make ongoing, provisional judgments about the risks to both inflation and growth, and monetary policy actions will be increasingly dependent on incoming data. in assessing the prospects for the economy, some appreciation of recent circumstances is essential, so let me now review key developments of 2005 and discuss their implications for the outlook. the household sector was a mainstay of the economic expansion again last year, and household spending is likely to remain an important source of growth in aggregate demand in 2006. the growth in household spending last year was supported by rising employment and moderate increases in wages. expenditures were buoyed as well by significant gains in household wealth that reflected further increases in home values and in broad equity prices. however, sharply rising bills for gasoline and heating reduced the amount of income available for spending on other consumer goods and services. residential investment also expanded considerably in 2005, supported by a strong real estate market. however, as i have already noted, some signs of slowing in the housing market have appeared in recent months : home sales have softened, the inventory of unsold homes has risen, and indicators of homebuilder and homebuyer sentiment have turned down. anecdotal information suggests that homes typically are on the market somewhat longer than they were a year or so ago, and the frequency of contract offers above asking prices reportedly has diminished. financial market conditions seem to be consistent with some moderation in housing activity. interest rates on thirty - year, fixed - rate mortgages, which were around 5 - 3 / 4 percent over much of 2005, rose noticeably in the final months of the year to their current level of around 6 - 1 / 4 percent. rates on adjustable - rate mortgages have climbed more considerably. still, despite the recent increases, mortgage rates remain relatively low

mr. greenspan reviews current monetary policy in the united states remarks by the chairman of the us federal reserve system, mr. alan greenspan, at the 1997 haskins partners dinner of the stern school of business, new york university, new york on 8 / 5 / 97. i am pleased to accept this year ’ s charles waldo haskins award and have the opportunity to address this distinguished audience on current monetary policy. a central bank ’ s raising interest rates is rarely popular. but the federal reserve ’ s action on march 25, to tighten the stance of monetary policy, seems to have attracted more than the usual share of attention and criticism. i believe the critics of our action deserve a response. so tonight, i would like to take a few minutes to put this action in the broad context of the fed ’ s mandate to promote the stable financial environment that will encourage economic growth. the federal open market committee raised rates as a form of insurance. it was a small prudent step in the face of the increasing possibility that excessive credit creation, spurred by an overly accommodative monetary policy, might undermine the sustained economic expansion. that expansion has been fostered by the maintenance of low inflation. but the persisting - - indeed increasing - - strength of nominal demand for goods and services suggested to us that monetary policy might not be positioned appropriately to avoid a buildup of inflationary pressures and imbalances that would be incompatible with extending the current expansion into 1998, and hopefully beyond. even if it should appear in retrospect that we could have skirted the dangers of credit excesses without a modest tightening, the effect on the expansion would be small, temporary, and like most insurance, its purchase to protect against possible adverse outcomes would still be eminently sensible. for the federal reserve to remain inactive against a possible buildup of insidious inflationary pressures would be to sanction a threat to the job security and standards of living of too many americans. as i pointed out in testimony before the congress in march, the type of economy that we are now experiencing, with strong growth and tight labor markets, has the special advantage of drawing hundreds of thousands of people onto employment payrolls, where they can acquire permanent work skills. under less favorable conditions they would have remained out of the labor force, or among the long - term unemployed. moreover, the current more - than - six - year expansion has enabled us to accelerate the modernization of our productive facilities. it has long been