By Evelina M. Tainer, Chief Economist, Econoday
12/8/00

Fed Chairman Alan Greenspan rocked the markets early this week when he addressed a bankers' conference in New York. His remarks were cautious as always, but he did leave market players with the hope that the Fed would be inclined to ease monetary policy if economic activity were indeed slowing down. One statement says it all: "In an economy that already has lost some momentum, one must remain alert to the possibility that greater caution and weakening asset values in financial markets could signal or precipitate an excessive softening in household and business spending." The consensus view is that the Fed will remove its inflation risk bias at the Dec. 19 FOMC meeting, with an actual rate cut not likely until the first or second FOMC meeting next year. Yet even if the Fed removes the risk bias at the December meeting, market players may still be disappointed. Now expecting a shift in the bias, bond and stock investors are hoping for a rate cut too. (I believe in Santa Claus, don't you?)