Magazine article American Banker

Greenspan Still Maintains Cut in Rates Not Necessary

Magazine article American Banker

Greenspan Still Maintains Cut in Rates Not Necessary

Article excerpt

SAN ANTONIO -- Amid widespread speculation that another interest rate cut was imminent, Federal Reserve chairman Alan Greenspan on Tuesday reiterated his belief that rates are low enough to stimulate an economic recovery.

Addressing a convention of community bankers, Mr. Greenspan said that monetary stimulus "now in the pipeline" would prove sufficient to generate a sustained rebound.

But the Fed chairman left wide open the possibility of more cuts, and some economists concluded that further easing may still be near.

Monitoring Developments

Mr. Greenspan said that "with all of the uncertainties atteding the current circumstances, we must - and will - continue to monitor day-to-day developments closely for validation of that judgment and, if necessary, move toward an increased degree of monetary ease."

F. Ward McCarthy, managing director of Stone & McCarthy Research Associates, Princeton, N.J., said Mr. Greenspan's speech "was similar to past statements with one exception: He put the timeliness of their decision-making on a day-to-day basis."

Mr. McCarthy added: "So we are closer to an easing than we were before."

He predicted the Fed would nudge the federal funds target down by 25 basis points, from the current 4%.

Mr. Greenspan last raised the possibility of a rate cut before the House Budget Committee on Feb. 4.

Since those remarks, which coincided with a meeting of the central bank's policymaking Federal Open Market Committee, economists have speculated that a rate drop might come at any time. …

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