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To: Les H who wrote (7246)	4/30/2003 2:11:09 PM
From: lurqer	Respond to of 29597

The phrase "wahatever it takes" keeps reverberating. lurqer

To: Les H who wrote (7246)	4/30/2003 3:36:00 PM
From: Les H	Read Replies (1) \| Respond to of 29597

FED WATCH: Wall Street Sticks To Fed Bets Post Greenspan By Michael S. Derby Of DOW JONES NEWSWIRES NEW YORK (Dow Jones)--Testimony Wednesday by Federal Reserve Chairman Alan Greenspan proved to be a big disappointment for economists hoping for new clues on the direction of monetary policy. Both in prepared remarks and through several hours of questioning before the House Financial Services Committee, Greenspan effectively told Wall Street what he's been saying for a long time: while growth should improve later this year, it's still to soon after the Iraq war to get a solid read on the economy's strength. "I continue to believe the economy is positioned to expand at a noticeably better pace than it has during the past year, though the timing and the extent of that improvement remains uncertain," he said. Most economists agree that in the main, Greenspan's assessment is a fair one. A wide range of economic statistics appear to support the view that activity slowed considerably in the run up to the Iraq war, largely because of concerns about the conflict. And with the war only having very recently ended, the lack of meaningful statistics leaves policy makers and economists alike only speculating what's next for the economy. Greenspan's views and the way he presented them left forecasters stuck with their preexisting views on monetary policy. For most, that means it's simply too soon after the war to make a change in the 1.25% fed funds target when the bank's policy-making group gathers next Tuesday, its first meeting since March 18, the day before the assault on Iraq started. "I don't think the intention" of the testimony "was to give us any heads up or preparation" on interest rates, said Bob DiClemente, an economist with Salomon Smith Barney in New York. "It was quite the opposite," he said. From the Fed's point of view, it cannot yet say what's next for the economy, so it has little reason to change interest rates right now, even with the April jobs report set to be released on Friday, DiClemente said. He believes that at this point, the jobs report will reflect more about the war economy than the current state of affairs. Clues? Still, Greenspan, who recently said he'd accept President George W. Bush's offer to extend his chairman term until 2006, did chuck a few curve balls at observers. Most pointedly, the Fed chief said "we still have room in monetary policy" for lower rates. But he added "that's not news, I've said that many times." Greenspan also signaled out the lack of price pressures as a problem for the economy. "As you know, core prices by many measures have increased very slowly over the last six months. With price inflation already at a low level, substantial further disinflation would be an unwelcome development," Greenspan said. In most other cases, that would be a red flag for economists that the Fed had moved closer to cutting rates, in a preemptive strike to ward off the more damaging phenomenon of price deflation. But this time around, most saw the remark within the broader framework of issues the Fed is worried about, arguing that this was more of a long term concern. For Bob Gay, an economist at Commerzbank in New York, Greenspan's comment on prices simply added up to another reason why he believes the Fed will leave interest rates steady for a considerable stretch of time. It "tells you (Greenspan will) stay generous for a lot longer than anybody realizes," in a situation where the central bank is already being quite generous with the liquidity it's providing to the financial sector, Gay said. A considerable chunk of the testimony was devoted to representatives trying to extract from Greenspan his views on the size of a Bush Administration tax cut package currently under consideration. Greenspan refused, preferring to reiterate statements from last February that supported some aspects of the plan, along with his continued preference for fiscal discipline. The Fed chairman was willing to say, however, that he believes the central bank is the best authority to provide short-term tweaks to the economy, and that fiscal policy was better targeted at the long-term economic environment. A Key Question With rate forecasts left unchanged, some economists said Greenspan may have provided enough fodder to indicate the Fed on Tuesday will be able to offer an economic outlook assessment. In March, the looming war had so muddied the waters that the Federal Open Market Committee took the highly unusual step of offering no assessment at all. But analysts disagree about what the Fed will say. Salomon's DiClemente said he thinks it's now possible the FOMC can argue economic risks are "balanced" because oil prices are down and war fears are gone. There's also no sign of inflation. Economists at UBS Warburg agree. But economists at Bear Stearns say Greenspan's testimony, which laid out a number of concerns about the economy, suggests "that the Fed will be more likely to adopt a balance of risks statement tilted towards weakness." If they're right, prepare for a whole new round of Wall Street looking for another easing out of the Fed. (Michael S. Derby writes about markets, the economy and the Federal Reserve for Dow Jones Newswires.)