UBS: Greenspan Likely To Provide Rate Guidance April 21

ByJohn S. McClenahen When Fed Chairman Alan Greenspan testifies on the economic outlook before Congress' Joint Economic Committee on April 21, he's likely to give "some guidance" on what it would take for the Federal Open Market Committee (FOMC) to raise U.S. interest rates, believe the economists at UBS Investment Research, New York. They expect Greenspan's testimony will "probably" preview any change in emphasis in the statement the FOMC makes following its May 4 meeting. Here's what they foresee the FOMC doing: upgrading its assessment of the strength of the U.S. labor market and "probably" raising its sense of the risk of inflation. But "more debatable, and probably most important for judging how soon before the Fed starts to raise rates, will be whether the reference to the Fed 'patient' is retained," the economists say. In the meantime, UBS figures that FOMC will raise the target for the influential federal funds rate beginning with a 25-basis-point increase in August. UBS expects the federal funds target, now 1%, to be at 1.75% by yearend.