When Fed Chief Speaks, Few Understand What He’s Said

How do you say the same words over and over and sound different each time?

It’s not hard if you’re Alan Greenspan.

The chairman of the Federal Reserve could rank as the most misunderstood man on earth, or the most confusing, depending on where you stand.

Financial markets hang on his every word. His convoluted statements leave lawmakers cross-eyed, jolt bankers awake and fill President Bush with concern.

It’s the art of Fedspeak, those Talmudic-like phrases favored by the world’s top central banker.

In the past month, Greenspan has stirred an unprecedented degree of confusion, sending markets soaring--then reeling--by chanting what seems to be a consistent monetary mantra.

“It’s like his voice is on a record, and the record is skipping: ‘We see recovery soon, we see recovery soon, we see recovery soon,’ ” said Robert Brusca of Nikko Securities Co. International.

Brusca is a soldier in an army of private economists paid big bucks to figure out what the world’s top central banker means--or what they think that he means. Brusca said Greenspan has been confounding.

While Greenspan’s projection of a spring rebound has been clear enough, it remains uncertain how swiftly and decisively he will cut interest rates if the expected comeback stalls.

“We believe the amount of monetary ease now in the pipeline is adequate to return the economy onto a path of sustained recovery,” Greenspan has said.

But the Fed will, “if necessary, move toward an increased degree of monetary ease.”

Translation: Interest rates are low enough to bring the economy out of recession, but the Fed will cut them further if the rebound fails to occur.

Greenspan--with slightly different wording--delivered that message Jan. 29. And again Feb. 4. On Tuesday, he repeated it again.

What the markets cannot figure out is whether to focus on the first part of the statement--that interest rates have hit bottom--or the latter--that they might come down more on signs of bad news.

“The biggest shock came Jan. 29, right after the President’s State of the Union address,” said David Jones of Aubrey G. Lanston & Co., referring to the day that Greenspan appeared before the Senate Banking Committee.

The markets went into a tailspin that day. Even Greenspan said he was perplexed by the reaction.

On Feb. 4, he trudged back to Capitol Hill and delivered virtually the same message. This time the markets detected slightly more emphasis on the tail end--that the Fed had a big insurance policy for the economy in the form of lower rates ahead. The Dow Jones industrial average hit a record.

Finally, this Tuesday, Greenspan traveled to San Antonio and spoke the words again.

This time the context was different as the employment picture had grown darker. The economy lost 91,000 jobs and the unemployment rate stayed at a disturbing 7.1% in January, the government reported Friday.

Amid the gloom, Greenspan gave the same message with the same emphasis. No matter. The markets turned down. Then rebounded. Traders were not sure what to do and blamed it on Fedspeak.