Dollars and Jens
Tuesday, April 20, 2004
Interest rates
I commented to my brother this weekend that the fed should raise rates a quarter point — barring unforeseen developments, which will undoubtedly occur between now and the next fed meeting — just to give the markets a kick in the shins. Well, Greenspan can give the market's shins a certain amount of rough treatment just by opening his mouth:
Greenspan told Congress that the nation's banking system is well prepared to deal with rising rates, which the market interpreted as a new signal that the Fed will tighten its policy sooner rather than later. The Fed chairman didn't directly discuss interest rate policy in his remarks to the Senate Banking Committee, but was expected to do so Wednesday, before the Joint Economic Committee.
The markets are very sensitive to what Greenspans says, in part because he tries to very gently correct it when he thinks it has different expectations of fed policy than he does. (If this is stupid, let me know; as I took yesterday off, today is my Monday, and my brain never does seem to have engaged.)

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