IMO, the handwriting on the wall is SO CLEAR that Greenspeak is behind the curve.....The economy needs another injection of liquidity --sooner rather than later....Forget waiting for FED meetings...We are dealing with consumer and corporate spender psychology....Greenspeak's legacy is on the line and what he does in the next 6 weeks may impact how our country moves through this downturn. If I were Greenspan I would cut. .50 basis points later this week and AGAIN cut another .50 basis points in late March -- the willingness to be aggressive and support & stimulate the economy would go a LONG WAY in helping to bring back confidence, spending, and the stock market....It's NOT rocket science...A lot is riding on Greenspan and his team...They have the opportunity to make the right decisions...A tax cut by Congress will not hurt either but that will take MUCH longer to see that take an effect. Oh well, just my early morning thoughts...
Here's the latest update....
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Altered Greenspan Speech Under Microscope
Wednesday February 28, 4:17 am Eastern Time
By Sarah Edmonds
WASHINGTON (Reuters) - He always draws the spotlight but the fact that Federal Reserve Chairman Alan Greenspan will offer an updated view on the U.S. economy on Wednesday will make the glare brighter than ever.
News that Greenspan would take the unusual step of altering the monetary policy testimony he delivered two weeks ago to a Senate panel as he goes before the House has fanned speculation in markets eager for signs the Fed will cut rates soon.
But several analysts said that when Greenspan faces the House Financial Services Committee, they do not foresee a drastic change in tone from the testimony he offered on Feb. 13 in the first part of his semiannual policy address.
In the question-and-answer period to follow, lawmakers are likely to focus less on the economy and more on the $1.6 trillion dollar tax cut package President George W. Bush stumped for in a speech to a joint session of Congress -- and the nation -- on Tuesday.
Greenspan irked Democratic lawmakers and heartened Republicans in January when he backed the idea of tapping government budget surpluses for tax cuts.
TASTE OF WHAT'S TO COME
Federal Reserve Vice Chairman Roger Ferguson may have offered a taste of what's to come in the monetary address when he reinforced the slowdown message on Tuesday while emphasizing the economy was in a period of uncertainty.
The economy is still hobbled by downside risks, Ferguson said, noting however that household spending seems to have held up well despite an ongoing drop in consumer confidence.
``Recent data on the U.S. economy confirm that a significant deceleration in activity has occurred,'' Ferguson said, adding ''the predominant risk remains that growth will be notably slower than would be consistent with the economy realizing its full potential over time.''
``In the current environment, monetary policy faces the short-term challenge of discerning the uncertain dimensions of the current slowdown in economic growth and responding appropriately,'' he said.
In addition, Ferguson said inflation was not a major concern right now, signaling that a recent pickup in prices would not stand in the way of additional rate cuts by the Fed.
Although some analysts took news that Greenspan would update his formal testimony to mean a rate cut was likely before the Fed's next policy meeting, others said they did not expect the overall mood of the message to alter dramatically.
``I wouldn't expect a lot of change in what he says,'' said Lyle Gramley, consulting economist for the Mortgage Bankers Association and a former Fed governor.
Gramley said data released since Feb. 13, when Greenspan delivered part one of his semiannual monetary testimony to the Senate, did not warrant a major overhaul of his position.
DISMAL NUMBERS
But some economists saw a raft of dismal numbers released on Tuesday as reason a new message may be warranted. They cited data on durable goods, home sales and, most importantly, consumer confidence.
Greenspan has said the key to keeping a recession at bay is taking action to ensure that a breach of consumer confidence does not occur.
The Conference Board said its index measuring Americans' confidence in the U.S. economy slumped in February for the fifth straight month to its lowest level in more than four and a half years.
``I think the drop in consumer confidence is enough to convince Alan Greenspan that he can move in between meetings,'' said Anthony Chan, chief economist at Banc One Investment Advisors in Columbus, Ohio. ``But he would have to convince the other policymakers.''
Badly savaged markets, particularly the technology-laden Nasdaq which was down more than 100 points, or 4.4 percent, on Tuesday, are unlikely to be soothed by anything short of a signal that fast rate cuts are on the way.
Investors are clinging to the hope that the Fed will repeat the action it took on Jan. 3, when it moved outside of its regularly scheduled meetings to cut rates. The Fed, which has slashed rates a full percentage point so far this year, next meets on March 20.
HOPE DASHED
Some analysts initially believed a rate cut could come as early as Tuesday, but that expectation was dashed.
Greenspan's spokesman said he will update the formal part of his testimony, something he doesn't usually do because his appearances in the House and Senate for the monetary report are usually only days apart rather than the current two-week lag.
But the news that there would be changes prompted Wayne Angell, a former Fed governor who is now chief economist at Bear Stearns in New York, to predict that there was an a 80 percent chance of a rate cut prior to the March 20 meeting.
Pierre Ellis, economist at Decision Economics in New York, said investors pinning their hopes on hints of a so-called intermeeting rate cut may be disappointed on Wednesday.
``Objectively there is very little reason for it,'' Ellis said. ``The only feature of the landscape that has changed is consumer confidence.
Ellis said it would ``dangerous'' for the Fed to grant an inter-meeting rate cut simply because the market demanded one. |
