siliconinvestor.com
<Greenspan Remarks on Economy Misunderstood
Jan 19 11:16am ET
WASHINGTON (Reuters) - A recent speech by Federal Reserve Chairman Alan Greenspan that helped undermine stock prices sounded more pessimistic than intended about prospects for a U.S. recovery, The Washington Post reported on Saturday.
Several unnamed Federal Reserve sources told the newspaper the market had "over-interpreted" what the chairman had said in Jan. 11 remarks in San Francisco in which he seemed to emphasize "significant risks" to the economy.
Stock prices fell steeply after the speech, partly because of what investors interpreted as a cautious tone. Bond traders concluded Greenspan was signaling the Fed would lower interest rates again later this month.
"According to several sources, it is much more likely that the chairman will propose that the Fed's target for overnight rates be left unchanged when the central bank's policymakers meet Jan. 29 and 30," the Post said in its Saturday editions.
That would sit well with many of the other 16 policymakers who will attend the meeting, the sources told the newspaper. Nevertheless, some of the sources cautioned, a rate cut cannot be completely ruled out, the Post said.
Part of the confusion over the speech was due to the subtlety of Greenspan's intended message that the recession was likely to end soon, but that a quick, strong rebound was not assured, the Post said.
Greenspan, who is keenly aware that his public utterances are closely parsed by the markets and often move global stock and bond prices, originally drafted a more optimistic-sounding speech about the prospects for recovery, the Post's sources said.
But the more upbeat tone raised worries that markets would expect a sharper upturn in economic growth than Greenspan foresees. So the speech was altered and much of the optimism leaked away, the sources said. ./.. contd...
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That'll make the markets jump.
Interest rates now at the bottom and increases on the way. They'll come thick and fast once they start [perhaps not as fast as on the way down]
Mq |
