To: Jim Willie CB who wrote (39073 ) 7/16/2001 6:50:24 PM From: stockman_scott Read Replies (1) | Respond to <<RESEARCH ROUNDUP: Economists expect Fed Chairman Alan Greenspan to avoid any suggestion that the Fed is done cutting rates when he testifies before the House Financial Services Committeee on Wednesday. But since his testimony is supposed to reflect the views of the whole Fed, the apparent division within the central bank would seem to foreclose any definitive signal of another rate cut to come. Greenspan will probably strike a balance by talking about the diminishing risk of inflation. Bear Stearns economists predict Fed Chairman Alan Greenspan will want to avoid saying anything to spook the markets, which "all but rules out any discusssion of any early return to a neutral balance-of-risks statement or any discussion of the timeframe in which interest rates might be increased." Instead, they expect Greenspan to note that the inflation outlook is very benign and will also reiterate his three concerns about the outlook: profits and capital spending, threats to consumer spending, and weakness abroad. Morgan Stanley economists expect Greenspan "to leave the door open to additional rate cuts while also emphasizing the magnitude of easing already done." While Greenspan's testimony is supposed to present the views of the entire Fed, the market will be looking for signs of just how firmly Greenspan remains in the dovish camp, considering the apparent divisions within the Fed. CIBC World Markets' Avery Shenfeld believes Greenspan "would like to be definitive" but can't drift too far from the divided discussion that no doubt took place at the June FOMC meeting. That will prevent him from providing a clear signal that more rate cuts are coming, although Greenspan also won't want to suggest the Fed is done cutting rates. "Most likely, Fed policymakers feel that the economy is in the process of bottoming out after hitting its weakest point early in the second quarter," according to economists at Aubrey Lanston. But Lanston economists believe the near-term outlook is still "highly uncertain" and "any recovery is likely to be delayed and more gradual than earlier expected" as businesses and consumers reduce their debt and equities continue to struggle.>>
