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Greenspan: Factors Slowing Inflation May Be Weakening

Former Federal Reserve Chairman Alan Greenspan on Wednesday said a rise in the cost of Chinese goods imported into the United States may be a signal a long disinflationary trend may be reversing.

"That is the first sign that I have seen that disinflationary pressure ... may be turning around finally," the former U.S. central bank chief said, referring to U.S. data released earlier Wednesday.

His comments came after the U.S. Labor Department on Wednesday released data showing that U.S. import prices for goods from China rose 0.3 percent in May, the largest monthly gain since this measure was first published in January 2004.

Speaking to a business exposition via videoconference, Greenspan said it was inevitable that at some point the downward pressure on inflation stemming from the opening of emerging economies would come to an end.

The former Fed chairman, who left office in January last year but who still wields great power over markets, also told a business group in Mexico City that he saw no signs the U.S. trade imbalance would pose any danger to the U.S. or global economy.

"There is nothing in the current account imbalance that I perceive as dangerous to ourselves or to the world economy," he said.

Furthermore, Greenspan said he believed global liquidity will likely ease over time. Even though liquidity will continue to increase, its rate of growth will slow, he said, adding that saving rates in developing countries over time will come down.

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