Greenspan confounded those predicting a "balanced tone" on the economy in testimony to the House last week, opting for a for a more pessimistic outlook in his prepared text. Yet he offered further hints that the Fed was drawing nearer to the end of its easing cycle, given the prior easings and the policy time lags involved.
Indeed, he is banking on final demand sustaining the economy through its near-miss with recession. Some in the press felt his Q&A comments were a little more hopeful last week and markets are sure to tune out the script until the Senators get their turn this time around. Under Democratic Chairman control this could prove more troublesome for Greenspan, given his endorsement of tax cuts and Bush policies in general.
Any change in tone or emphasis will be pounced upon, but the cold reality of the widening corporate profits recession will have the last word. From Standard & Poor's Global Markets