Markets await Fed verdict on upbeat data

US Federal Reserve chairman Mr Alan Greenspan is set to testify on the US economy today, with markets awaiting his comments on…

US Federal Reserve chairman Mr Alan Greenspan is set to testify on the US economy today, with markets awaiting his comments on the recent run of upbeat economic data.

Some economists think that when the Fed chief gives part two of his semi-annual monetary policy testimony before the Senate Banking Committee at 3 p.m. his tone may differ somewhat from last week, when he delivered the first part to the House of Representatives financial services panel.

If the Fed chairman puts heavy emphasis on the potential for a solid economic recovery, some analysts might interpret that as a signal the central bank may be considering a reversal of last year's 11 interest rate cuts.

On the other hand, some experts said the Fed may not be in any rush to even consider pushing up borrowing costs with the outlook still uncertain for some key areas of the economy, such as business demand for capital equipment.

READ MORE

Typically, Mr Greenspan delivers identical versions of his formal monetary testimony to both the House and Senate committees and then fields whatever questions legislators have.

But there have been exceptions to that rule. For example, one year ago, when there was a time lag of 15 days between the Senate and House testimonies, the Fed chief modified a few paragraphs of his presentation the second time around, updating it to reflect the latest economic data.

Although some analysts said it was possible he could tweak his formal testimony today, many said he might prefer to reserve any new points for the question-and-answer session.

On February 27th, Mr Greenspan told the House Financial Services Committee that a turnaround seemed to be under way in the US economy, which fell into recession in March. But he cautioned the recovery would probably be tepid.