Hopes Dim for Early Fed Rate Move

Business hopes that the Federal Reserve might go ahead and cut interest rates this week, instead of waiting for its March 20 policy panel meeting, were doused Wednesday as Fed Chairman Alan Greenspan addressed the House Financial Services Committee.

That implies any further monetary stimulus will wait a while longer, to get the U.S. economy cranking faster or to cut the carrying cost of business loans for equipment such as truck fleets.

Fed rate cuts take a while to stimulate shipment activity, but can trim operating costs immediately.

Most Fed watchers had been looking for another half-point rate cut soon from the Fed. That was first expected to happen at the Fed’s March meeting, but in recent days some analysts – including former Fed Gov. Wayne Angell of Bear Stearns – began predicting the Fed would cut rates sooner, perhaps this week.

As is typical with Fed testimony, news services rushed into print Wednesday with differing interpretations on what Greenspan was suggesting. But financial markets soon responded negatively after days of hopes building for another early rate cut.

CBS MarketWatch said Greenspan indicated the Fed sees no reason for an immediate cut in interest rates, and cited his remarks that although consumer confidence has weakened the consumers still have enough confidence to make longer-term decisions.

To the Associated Press, Greenspan’s comment that the sharp economic slowdown has yet to run its course showed that the Fed is clearly ready to do more to stimulate the economy.

However, the Reuters news service – one of the most-watched by financial markets – led its report with Greenspan emphasizing how the Fed prefers to make its rate moves at its scheduled policy committee meetings.

When the Fed began cutting interest rates, it did so Jan. 3 with an unexpected half-point cut between scheduled meetings, then followed up with another half-point cut at the normal meeting as January ended.

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