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More Greenspan Today

Posted By Barry Ritholtz On July 21, 2005 @ 7:26 am In Economy | Comments Disabled

Get set for some more of the same from the Fed Chair today.

Here’s some resources to use:

The complete text of testimony [1]

Federal Reserve’s Monetary Policy Report to Congress [2]

Response to JEC Chairman Saxton on 7/11 [3]

Consider also, some reactions from the Dismal set regarding the "Maestro’s" testimony:

* * *

The key upside risk to inflation is — no surprise here — the upturn in unit labor costs. Greenspan is not sure how much of this is real and will be sustained but he simply cannot afford to take chances. On the downside he is concerned about further rises in energy prices but points out that if they merely level off — they don’t need to fall — then "the prospects for aggregate demand appear favorable".
– Ian Shepherdson, High Frequency Economics

While investment rates in the US and Japan have picked up, investment rates in Europe remain relatively low. The shortfall of worldwide investment intentions relative to the availability of savings has pushed long-term interest rates down. However, long-term interest rates can be expected to move up gradually as global investment rates pick up.
– Brian Bethune, Global Insight

The Fed sees growth on a sustainable footing, and the risk that the softer data in March were signaling a slowdown has been significantly reduced in the minds of the FOMC members. Greenspan also signaled the need for continued removal of monetary accommodation and there is no hint in this testimony that the Fed sees that process as drawing to a close any time soon.
– John Ryding, Conrad DeQuadros, Elena Volovelsky, of Bear Stearns

Greenspan sees the pick-up in hourly compensation as a result of temporary factors and also believes that the current statistics overstate the degree of slowing in productivity. We concur with this latter observation and look for the GDP revisions due out at the end of the month to reveal somewhat stronger output growth implying an upward adjustment to the productivity data.
– David Greenlaw and Ted Wieseman, Morgan Stanley

His discussion of inflation completely ignored the apparent deceleration in inflation over the past three months, presumably because he puts much less weight on high-frequency and commodity-related inflation swings than most market participants.
– Bill Dudley, Jan Hatzius, Ed McKelvey, Andrew Tilton, of Goldman Sachs

The uncertainty which the Chairman spent most of his time talking about relates to the behavior of long-term interest rates and the housing market. He continues to describe low-long term interest rates as unusual. In contrast to recent comments in which he was open minded about the cause of this "conundrum" the Chairman focused on two global causes of low yields — a fall in risk premium resulting from less inflation and growth volatility; and the excess of intended savings over investment.
– Bruce Kasman, J.P. Morgan

* * *

Source:

Economists React

WSJ, July 20, 2005 1:03 p.m.
http://online.wsj.com/article/0,,SB112187432542290928,00.html


Article printed from The Big Picture: http://www.ritholtz.com/blog

URL to article: http://www.ritholtz.com/blog/2005/07/more-greenspan-today/

URLs in this post:

[1] The complete text of testimony: http://www.federalreserve.gov/boarddocs/hh/2005/july/testimony.htm

[2] Federal Reserve’s Monetary Policy Report to Congress: http://www.federalreserve.gov/boarddocs/hh/2005/july/fullreport.pdf

[3] Response to JEC Chairman Saxton on 7/11: http://www.house.gov/jec/hearings/testimony/109/ag06-09-05questions.pdf

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