Greenspan Seen Both Sober, Optimistic

In remarks that news services variously reported either as “a sober assessment” (Associated Press) or as “remarkably optimistic” (CBS MarketWatch), Federal Reserve Chairman Alan Greenspan said Tuesday that risks to the U.S. economy continue on the downside but that a rebound should emerge once businesses work through an inventory glut.

Analysts looking for clues from Greenspan about further cuts in U.S. interest rates thought he was signaling more cuts to come, reports said. Markets generally look for the Fed to cut rates in March by another half-point, on top of two such cuts during January.

The difference in interpretation hinges on which part of Greenspan’s testimony the reporters emphasized. He delivered prepared remarks to Congress of the Fed’s formal assessment of the economic outlook, and then was slated to respond to questions from members of the Senate Banking Committee.

Greenspan said data emerging for January showed some improvement from December. However, he also said that recessions are difficult to forecast because of sudden shifts in consumer confidence.

And the Fed’s official projection sees economic growth of just 2% to 2.5% over the four quarters of this year. Since most economists – including some Fed officials – have said they expect a pickup in the second half, that forecast leaves open the possibility of very weak growth or even a contraction in at least the early part of 2001. Transport Topics

6799