Newspaper article THE JOURNAL RECORD

Somber Economic Forecast Expected from Greenspan

Newspaper article THE JOURNAL RECORD

Somber Economic Forecast Expected from Greenspan

Article excerpt

WASHINGTON (AP) _ When Federal Reserve Chairman Alan Greenspan delivers his midyear assessment of the economy today, no one will be listening more closely than George Bush.

But analysts said Monday that Greenspan's congressional testimony may provide little comfort to a president who has seen his standing in the polls plummet along with the economy.

Many of them said they expect Greenspan to deliver a rather somber forecast, predicting that the recovery will strengthen in coming months but that economic growth will remain anemic, at rates less than half of what is normal in a typical upturn.

"Greenspan will emphasize that he is trying to ease credit enough to keep the economy from going into a nosedive and achieve at least a modest amount of growth. Under the circumstances, that is the best he can do," said David Jones, an economist at Aubrey G. Lanston Co.

Such a forecast is not likely to sit well with Bush as he faces an election less than four months away. The president has said he expects his standing in the polls to improve as the economy does, but recent economic news has been uniformly bad.

The unemployment rate _ the most politically sensitive of all economic barometers _ has shot up by 0.6 of a percentage point in the past two months, reaching an eightar high of 7.8 percent.

When the latest bad jobless report was issued July 2, the Fed acted within minutes to cut its discount rate, the interest it charges banks, to a 29-year low of 3 percent.

Economists said they don't rule out further rate cuts, but only if the economic news remained on the gloomy side _ not a pleasant prospect for Bush.

"The Fed will look like it has its head in the sand if Chairman Greenspan doesn't take serious note of the recent data that has been so negative," said Allen Sinai, chief economist of the Boston Co.

"There has been a distinct loss of momentum as we move through the summer, raising increasing questions over whether the economy is slipping back into recession," Sinai said.

Greenspan's comments will be made before the Senate Banking Committee as he releases the central bank's midyear report on the economy and monetary growth targets. …

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