WASHINGTON (Reuters) - Former Federal Reserve Chairman Alan
Greenspan said his successors at the U.S. central bank should be
cautious about cutting interest rates because of inflation risks, and
he forecast home prices will drop further, according to interviews
published on Sunday. Greenspan, whose memoirs hit book shelves on
Monday, said the Fed should be careful not to cut rates too
aggressively because the risk of an "inflationary resurgence" is
greater now than when he was chairman, the Financial Times reported. The
U.S. central bank meets on Tuesday and is widely expected to cut
benchmark federal funds rate -- currently at 5.25 percent -- by at
least a quarter of a percent age point to help the economy weather a
housing downturn and a credit crunch. Greenspan said the U.S. housing slump is likely to deepen more
than many analysts expect, with home prices falling by at least a
"large single-digit" percentage amount and perhaps by a double-digit
percentage, he told the Financial Times. The Fed is currently
weighing the adverse impacts of the housing downturn on the broader
economy after a recent report showing employers shed 4,000 jobs in
August raised warning flags. UNDERLYING STRENGTH SOURCE OF THIS STORY
