Wha'd He Say?

Taking the Fed chairman's testimony Wednesday before the Joint Economic Committee of Congress purely at face value, one would have to conclude that the funds rate is not about to fall any time soon.

Nowhere in his testimony did Federal Reserve chief Alan Greenspan mention an ease. Nowhere did he indicate, even with substantial uncertainties stemming from the weak economies of Asia, that there will be a reason to lower interest rates.

In fact, Greenspan noted that consumer price inflation picked up in the second quarter, albeit modestly. The Fed wonders if the increase is "transitory or the start of a more worrisome pattern that may well require a response." That hints at higher rates.

The Fed chief's views, then, can be called open-ended. "There may come a time . . . " in other words.

Until that time, however--or until the time Greenspan's statements carry a definite time stamp rather than a vague threat or promise--traders and investors aren't about to miss the ride. The demand for Treasuries--from money flowing out of Asia and out of U.S. stocks--is increasing at a time when the supply of Treasuries is decreasing.

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