Chicago Tribune

Federal Reserve Chairman Alan Greenspan may have one foot out the door, but the man who a few years ago was being dubbed emperor of the globe still may have some mischief in mind before he departs.

With the economy humming, the world’s dominant central banker may be seeking to engineer not just one, but two more credit tightenings before he exits the stage in early February.

As an inflation hawk, Greenspan has witnessed a huge spike in the price of gold, above $500 an ounce, seen as a warning sign that global inflation will worsen. Bottom line: More interest rate hikes will be needed.

Economist Brian Wesbury says the central bank’s Open Market Committee meeting on Dec. 13 will end with a quarter-point hike in rates, to 4.25 percent. By May, he expects the Fed to push the short-term lending barometer to a flat 5 percent.

“Greenspan wants to get as much done as he can before he leaves, so there is no doubt that rates will ratchet higher at both of his remaining meetings,” said Wesbury, of Claymore Advisors in Lisle, Ill.

Beyond the rising price of gold, members of the Fed are worried about accelerating economic growth and a shortage of skilled workers, which could mean inflationary pressures will be difficult to control, he said.

Once short-term rates hit 5 percent, Wesbury expects the central bank to take a pause.

In the meantime, he sees pressures building on mortgage rates, curbing the red-hot housing market.

“The housing sector will slow, but it won’t collapse,” Wesbury said. “House prices will level off, but there will be no big decline.”

Watch for daily reports about holiday spending, as the nation nervously watches not only discounters but traditional department stores.

Since Thanksgiving, the only big winner has been Wal-Mart, which outdistanced rivals Target, Sears and all the old-line names. Additional steep discounting may be needed to boost traffic.

Economist Scott Anderson of Wells Fargo & Co. in Minneapolis says, “Continued moderate job creation will be a critical factor keeping spending afloat at a very difficult time for consumers.”

He says Americans are battling “rising interest rates, a slowing housing market, rising minimum credit-card payments, high energy costs and pinched real earnings growth.”

The stock market fell back last week, ending a period of more than a month in which a year-end rally was taken for granted.

With cold weather setting in, the next question mark for investors is oil prices. If they spurt above $60 a barrel in the next few days, as some analysts expect, the Dow Jones industrial average may be unable to top 11,000. And Santa Claus may delay his scheduled appearance on Wall Street.