“Looking forward, the restraining effects of recent developments on the US economy are likely to intensify,” he said.For most of this year, the Fed has been more concerned with the threat of a resurgence of inflation than with economic weakening. THE WORSENING global economic crisis led America’s central bank to signal an interest rate cut yesterday. Alan Greenspan, Chairman of the Federal Reserve, said it was important to act quickly to ease the problems of Asia and Russia. “I do think that we have to bring the existing instability to a level of stability reasonably shortly to prevent the contagion from really spilling over and creating some very significant kinds of problems for all of us,” he said in Congressional testimony.

The Dow Jones index closed up 257.21 points, or 3.2 per cent, at 8154.41.Mr Greenspan said policy-makers should be “especially sensitive to the deepening signs of global distress,” and that worldwide economic problems would help to keep US inflation under control. “I think we know where we have to go.”
Mr Greenspan’s words were taken by investors as a clear signal that a rate cut is close, and US stocks soared as he spoke. SHARE PRICES closed higher, as gains on other markets overshadowed concern about the political situation in Italy. The Mibtel closed up 279 points at 19,193, while the Mib30 rose 540 to 28,544. The Communist Refoundation party, whose votes ensure Prime Minister Romano Prodi a lower house majority, is undecided over whether to back the 1999 budget and could pull its support altogether, which could force Mr Prodi to resign The budget will be presented for cabinet approval tomorrow..

Indonesia’s creditors agreed yesterday in Paris to reschedule $4.2bn in government debt due in the next two years, easing the debt burden. The rupiah had plunged 51 per cent this year, its second year as the world’s worst performing currency.. The Indonesian rupiah was little changed at 11,000 to the US dollar amid light trading, as concern about capital controls eased. Christopher Hampson, chairman of building materials group RMC, will take over as chairman..