Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Biotech / Medical : Ligand (LGND) Breakout! -- Ignore unavailable to you. Want to Upgrade?

To: Cheryl Galt who wrote (25724)	9/23/1998 5:22:00 PM
From: tonyt	Read Replies (2) \| Respond to of 32384

GREENSPAN SIGNALED that the Fed is prepared to lower interest rates in response to the effects of the continuing global economic crisis on the U.S. economy. Greenspan Signals That Fed Is Prepared to Lower Rates An INTERACTIVE JOURNAL News Roundup Federal Reserve Chairman Alan Greenspan signaled that the central bank is prepared to lower interest rates in response to the effects of the continuing global economic crisis on the U.S. economy. In Congressional testimony Wednesday, Mr. Greenspan refused to comment directly on plans of Fed policy makers, who will meet Tuesday, but said his colleagues were aware of the seriousness of the global financial crisis. "I think we know where we have to go," Mr. Greenspan said in response to a question. "We don't underestimate the problem." Investors took his statements as a sign that Fed policy makers, meeting next week, are likely to reduce interest rates, perhaps as early as next week. The Dow Jones Industrial Average advanced sharply, finishing with a gain of more than 250 points. "Greenspan told us in unambiguous terms that he will be cutting interest rates next Tuesday," said Sung Won Sohn, chief economist at Norwest Corp. in Minneapolis. "He really emphasized global economic turbulence and its impact on the U.S. economy." Testifying to the Senate Budget Committee, Mr. Greenspan said that Fed policy makers believe that "deteriorating foreign economies and their spillover to domestic markets have increased the possibility that the slowdown in the growth of the American economy will be more than sufficient to hold inflation in check." He contrasted that assessment with the Fed's earlier belief that the risks of economic slowdown and of inflation were evenly balanced. As always, though, Mr. Greenspan's statement was carefully balanced. Although seeing "little evidence" that foreign problems or tightening in domestic markets "have produced any significant underlying weakness in the American economy as a whole," he also said that "looking forward, the restraining effects of recent developments on the U.S. economy are likely to intensify." He offered no hope that the economic downturn abroad had bottomed out, pointing out that Asia's woes have spread to Russia and saying "there is little evidence that the contagion has subsided" and "noted that the most recent more virulent phase of the crisis has infected our markets as well." The Federal Open Market Committee, which sets monetary policy, will meet Tuesday. Mr. Greenspan's comments came in the day before preceding the so-called one-week blackout period on monetary-policy comments preceding the meeting. U.S. businesses and some economists have been clamoring for a reduction in interest rates -- which have held steady since March 1997 -- for the last month or so, as spreading economic malaise abroad has slowed U.S. growth considerably and pummeled corporate financial results. A rate reduction could give the U.S. economy a jolt of energy as the cost of consumer and corporate borrowing falls. A cut could also weaken the dollar to the benefit of some ailing currencies abroad by making dollar-denominated deposits less attractive. As he has in the past, Mr. Greenspan stressed the speed -- "efficiency" in his vocabulary -- at which the interconnected markets of the world react to changes in other markets. Observing that the "startling declines" of currencies in some emerging markets against the dollar, Mr. Greenspan said that "market discipline appears far more draconian and less forgiving than twenty or thirty years ago." "Policy makers around the world," he said, "have to be especially sensitive to the deepening signs of global distress." Mr. Greenspan first raised the possibility of lower interest rates in a speech Sept. 4 in California when he disclosed that Fed policy makers no longer view inflation as the greatest near-term risk to economy, believing its dangers are balanced with the threat of an economic slowdown. He disclosed that as a result, the Fed panel agreed that a rate reduction was about as likely as a rate increase in the weeks ahead. "It is just not credible that the United States can remain an oasis of prosperity unaffected by a world that is experiencing greatly increased stress," he said at the University of California at Berkeley. Subsequent statements by President Clinton and by the deputy finance ministers of major industrial nations pointed to a coordinated cut in rates. But Mr. Greenspan dashed those hopes in testimony to the House banking committee. He did, however, say that the U.S. economy was seeing the "first signs of erosion at the edges, especially in manufacturing" and that "deflationary forces ... are moving in our direction." On Tuesday, William McDonough, president of the New York Federal Reserve Bank and vice-chairman of the Fed's policy-making panel, said that the balance of risks to the U.S. economy has shifted from concerns about inflation to one of concerns with inadequate growth.