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DATE: O1/20/99 TIME: 10:18 AM TO: Ralph Grimn @+1 (503) 373-4401 Sesfirst Bank pAGE: 001-001 r• a i ~i '. JRM 20 '99 09~~50 2Q6 ~8-8866 P.1 # Printed By R~ute~~a ~ Wedrt~~d8y. 2b Janu~ry Z999 09:56_~5 ~13:41 ~ 20 ~Fan~'TF~S=~~CUS=Greenspain sees s o s ~ng - ~- ._..__ .S: econamy Upd~tes with fno~e detaits, quotes, r+e~~tian) By Knut Enge~lmann WASHiMGTON, ,~an 20 (Reutera) - Federaf RQServe Ch~irman Alan C3reenspan said on Wednesday turmai) abroad and fall(ng export~ posed ~isks to the 'sparkl(ng° U.3. ec;ortcymy and suggested he was in no ru~h to cut lnt~r~St r2~#+2s. Tes#iTyin~ befare the U.S. Hous~ ~f R~preser~t~tiyes Ways and Me~ns Carnm~##se, Greenspan sounded a cautious note un the n~ar-record level of U.S. stock prices, whioh f~e said may be diffic~it to sust2E~n because of weaker corparafe profits. "While the~ ar~ rlsks going tor~rd, #o dabe domesttc demand and hence .emplayment and output tn the United Stat~s c~rtainly has remalned vigordus," he saicf in his first testimany af the year. "Though the gace of ~~on~m~c expansian is widefy exp~~#~d t+~ moderat~ as 1899 unfolds, signs of an apprec[able slawdawn as yet remain scant." Gr~~nspan kept his traditianally tight-lipp~d stan~ on the direction of U.S. fnfierest r~tes by r~t cdmt~tt~ntirtg directly on th~ level of k-orrowing c~sts, ~ But ecanomists and traders interpretecf his st,atements ott the U.S. ecanamy and #he risks it facaad as 6roac#ly balarit~ed, sug~esti~g the U.S. aentral bank was ir~ no hurry to Ch~nge in~erest rates soon after thr.ee red~uctions last year. ,~At fir~t glance it seems thece's not go[ng to be a r~te hike ar rate cut,'~ said Teis Knukhsen, ct~ief strateg~st at SEB Merchant Banktng. "This ~onfirms the Fed is ln neutral mode," he said, referring to the Fed's policy stance. . Reviewing recent devefopment~s in fin~ncial marke#s, Greer~span said thay hed re~r~ed well to events in Brazil, wh~ch la~t weelc deval~ed its res~t currency fn resp~nse #o mt~unfing investar pressure_ tie said sustained r~farms by the Brazillan gdverrrmen#, whose pensiort refarm plans faced a key vote fater on Wednesd~y, was cnxclal to avoid ~ spre~ding of ttte crisis in the region ~~d bolster invesfor confi~ence. Reinforcing for financi~l markets his wait-and-see ~pproach on interest rates, Greenspan said the Fed would need ta cor~tinue scx~tlnizing d~velopments clasely an the world's C~pital markets. "In light af the fmportance of financial markets In the economy, ~nd of the vola~lity and vufnerability in financial asset prices more generaliy, policymakers must cantinue to pay particular attention to these markets," he ~aid. Gre~n~p~n's comments on tt~ vuEn~~bil~#y of stock priccs to a downtum ureakeRed p-ic:es pnly temporarlly. The bigger imp$cC w~s in the bond market, wh~re his remarks were seen as ruEing out a rate cut m the near future_ The 3p-year U.S. Treasury bond lost a point in value arout~d the U.S. midday. "Tfne bot~om lin~ is k~e's very clea~iy telling us the ~ed is not interested in cutting rates right naw,,' s2~id, Christopher ~.ow, chief ecar~m~st ~t First Tennassee Capital Markets. We al! knew that, but maybe we re nat used to him~ spelling it out so dearEy " !n hi3 testimony, Greenspan cmph~si~d th~t the cer~tral bank does not use its interest ra#e policy to tar~et spe~ific ievets ln the stc~Ck market. Rai9ing the possibili#y th~rt recent ~a~ins in stodc pfices may be dffficttlt #o sustsin, he said: 'The (~veE ofi equity prit~3s w~uld appear ta envision substarrtially grea~er growth of profits than has beert experienced ~f Ia~te." ~~Bu#, while ass~t v~lues are very jmpvrtant to the econamy and so must be care'Fuily monitor~ed ar~d assesse~ by the ~ederal Fteserve, they are not therresefves a target of mo~eta~r palicy," he said. While saym~ the perfarmance to date of the U.S, economy had ~een impressive, ~reenSp~l1 52tjd this • achievemen# should nat ae taken fio~ granted. "1'0 ~ssess the economic outlook prop~ rly, we n~ed ta reach beyand the rnere description af America's sparkling economic perfiarmance of ei~ht years of,r~card peacetime expansi~n #o seek a deeper u+~d~rs#~nding of the fnrces that have produced ~t, ~e said. For re{ated news, doubl~ click on one of the follpwing cades: [C] [MTL jCRO~j SC>F] [U] I~~ LMNt] ~.11 [CAN [UKI] I~l [1~1 ITl [El N~~SH] [USJ [FEQj (GENJ ~DBTj [(NT] EC~VD] (~kJNlj (F~] (MTG] [MMTJ LUSC] [N~] [ECt] [LEN] [RTRS] . .. ._ .. .. ...__...._..-"'-'--. W~dnesrlay, 2D January 1999 13:41~~~ ~~ ~ R~RS [nN2Q131587] ~ `~~ ~ , fz`~#s~~i`eoro.~.o~sz - ~ `~~ ~~~, +~ . ~C*~1.c~. +Y`~ {'a~„r~.~e.~~a~w~'r~ r~va ~-n~-