Demand is not being created out supply. Demand is being created out of thin air due to explosition of fictitious capital on Wall Street. This demand pushes up capacity utilization, though this is being achieved without much pressure on wages or unit labor costs at all! Still this excess demand threatens to outrun supply and exert inflationary pressure. Greenspan is trying to moderate that.
Now keynesian types have never met an interest rate reduction they didn't like. But is it possible that lower interest rates=>greater fictitious capital=>excess demand=>inflation=>flight from dollar=>collapse of international economic system without a stable reserve currency and US economic insolvency leading to retraction of US global military presence and US protectionism which then gives rise to new militarisms abroad and beggar thy neighbor trade policies.
I think catastrope following piercing of the bubble beckons without and with interest rate reductions. As Joan Robinson noted, Marx may not have been so wrong to downplay the importance of monetary policy.
Yours, Rakesh