NEW YORK (AFX-ASIA) - Federal Reserve board chairman Alan Greenspan said the central bank will not respond to any tax cut likely to be passed soon by Congress until it sees evidence of its impact on the economy.
"We never respond to fiscal policy until we know how it is impacting the economy," Greenspan said in a question and answer session after a speech to the Economic Club of New York.
The Fed chairman also said the negative economic impact of higher energy prices may be underestimated.
"The past three recessions have seen oil spikes coming together. Coincidence?" Greenspan asked.
Greenspan said the Fed also has a difficult time assessing consumer confidence.
"It has always been difficult to judge the state of consumer confidence," Greenspan said.
He noted that retail and consumer confidence sometimes move in opposite directions, bringing into question the validity of consumer confidence measurements. The high-tech economy has also made the task of assessing the economy difficult for the central bank. "The speed of business information itself has made the understanding of policy adjustments as well as analyses more difficult," Greenspan said, adding that all aspects of economic developments have "quicked measurably." Greenspan said the Fed is still grappling with the impact of stock market rises and falls -- the wealth effect -- on the economy. "We do not fully understand the process of declining savings and realized capital gains," he added.