Word: feds
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...careers of Bush's chosen treasury secretary and vice-president and his inherited Fed chairman all date back to the Ford years. For a new millennium in which the U.S. economy must learn to play without its superstar of the past eight years, some knowledge of the old problems - high energy prices, dispirited consumers, international uncertainty - could come in handy. The new Republican president remembers the Reagan tax cut. His advisers remember stagflation. As long as somebody remembers Gingrich, Clinton and the virtues of sound fiscal policy, a little spring turbulence could work out for all concerned...
Alan Greenspan figures he's right on schedule. Tuesday, at the customary 2:15 p.m. in the East, the Fed stayed in line with expectations and officially took its eye off inflation, leaving interest rates alone but restoring its bias - the only sanctioned statement of what the Fed's own expectations are - to neutral. The Fed's explanation: "While some inflation risks persist, they are diminished by the more moderate pace of economic activity...
...descent starts to steepen, some of the passengers are starting to scream (including a few Fed governors, according to Monday's Wall Street Journal). Last week, Sen. Byron Dorgan (D-N.D.) implored the Fed to cut rates and avoid a recession before it was "too late." And a sizable minority of Wall Street went into Tuesday thinking Greenspan should have cut rates by a quarter-point, as a Christmas gift to the markets and as an acknowledgment that...
...might well have hopped at that; as it is, Fed funds futures - the Greenspan casino - went into the meeting with a small bet on the cut, and the bias-only move is likely to eat up Monday's 200-point rally by week's end. The NASDAQ, meanwhile, will continue to mutter about its own issues, wondering only incidentally if the tech sector will prop the rest of the economy up or drag it even further down...
...have guided the economy into its present "soft landing." Those rate increases, designed to keep the expansion from overheating, slowed growth from a blistering 5.6% in the second quarter of this year to just 2.4% in the third. And if the economy should falter next year, the Fed could decide to lower rates again. Says Martin Baily, chairman of the President's Council of Economic Advisers: "Everyone believes Greenspan and his colleagues should continue to do the superb job they have been doing...