NCPA - National Center for Policy Analysis

Progress At The FED

May 15, 1997

A number of economists are praising the long-term accomplishments of the Federal Reserve Board under Chairman Alan Greenspan. Since he took the Fed helm in August 1987, inflation has been lower and more stable, the economy has flourished and financial markets have been stronger and steadier.

Some statistical comparisons demonstrate that progress has been made.

  • Inflation has averaged 3.6 percent under Greenspan, compared with 6.4 percent over the previous 37 quarters -- a time comparable to Greenspan's tenure.
  • The quarterly variation in inflation has declined by two-thirds and -- in the most recent six years -- inflation has averaged even less than 3 percent.
  • The jobless rate has averaged 6.1 percent under Greenspan, compared to 7.5 percent in the 37 quarters before him.
  • The U.S. economy has expanded in all but three of the last 37 quarters -- achieving an overall gain equal to the size of the West German economy.

As for long-term interest rates, these have averaged three full percentage points lower under Greenspan than in the previous period. A 30-year, fixed rate mortgage costs about 8 percent today -- compared to 10.5 percent ten summers ago.

Finally, the volatility of long-term interest rates was cut in half. And stock prices more than doubled after adjusting for inflation.

Source: James W. Coons (Huntington National Bank of Columbus, Ohio), "It's Smooth Flying With Greenspan's Fed," Investor's Business Daily, May 15, 1997.


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