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Strategies & Market Trends : VOLTAIRE'S PORCH-MODERATED -- Ignore unavailable to you. Want to Upgrade?

To: Jim Willie CB who wrote (39200)	7/18/2001 10:55:48 AM
From: stockman_scott	Respond to of 65232

Greenspan Says Economy Still at Risk Wednesday July 18, 10:36 am Eastern Time <<WASHINGTON (Reuters) - The struggling U.S. economy faces a range of hurdles that could imperil a hoped-for rebound and force the Federal Reserve to cut interest rates further, Fed Chairman Alan Greenspan said on Wednesday. But Greenspan told the House Financial Services Committee that six rate cuts the Fed already has done so far this year, plus a tax cut and cheaper energy costs, should assist the economy as it tries to pull out of its slowdown later in 2001. ``The period of sub-par economic performance, however, is not yet over, and we are not yet free of the risk that economic weakness will be greater than currently anticipated, and require further policy response,'' Greenspan said in remarks which sparked a rally in U.S. Treasury bond markets. The central bank chief added that the weakness could come from softer demand abroad or domestic events. ``But we need also to be aware that our front-loaded policy actions this year coupled with the tax cuts under way should be increasingly affecting economic activity as the year progresses,'' Greenspan said. He said that despite the risks to the downside, Fed policymakers opted for a smaller quarter-point interest rate cut in June because rate cuts tend to operate with a lag and ''with our cumulative 2-3/4 percentage points of easing this year, we have moved a considerable distance in the direction of monetary stimulus.'' He said that if conditions warrant, the Fed may need to ease further, but that it must not lose sight of its goal to maintain longer-run price stability. The Fed chief indicated firmly that he did not see any threat from inflation. ``The lack of pricing power reported overwhelmingly by business people underscores the quiescence of inflationary pressures,'' Greenspan said. Analysts said the remarks indicated there is a chance of another small interest rate cut from the Federal Open Market Committee when it meets in August. ``There's nothing startling in the headlines. But his emphasis that there is no recovery, and comments on the slowing growth risk in the rest of the world is consistent with the idea that another small rate cut in August is probably still on the boards,'' said David Roberts, senior international economist at Bank of America Securities in New York.>>