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Morning News

Rosensweig: Greenspan Expected to 'Hold His Punch' On Interest Rates Today

Aired August 22, 2000 - 11:10 a.m. ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

BILL HEMMER, CNN ANCHOR: We're going to shift our focus now to news back in this country: Wall Street and the Fed. Awaiting word now on whether interest rates will be heading up or whether they will stay right where they are. A decision by the Federal Reserve could come as early as today, expected 2:15 Eastern later today.

Let's talk about it more now on what the Fed may or may not do. Jeff Rosensweig, he's an economic expert and associate dean at Emory University's business school. He's here in Atlanta.

Hey, Jeff. Good morning.

JEFF ROSENSWEIG, EMORY UNIVERSITY: Good morning.

HEMMER: What's your best guess? Do they stay where they are right now, just like they did back at the end of June?

ROSENSWEIG: I think they're going to stay. I think Hurricane Al is going to hold his punch this time, but he might have one or two left in the next six to eight months.

HEMMER: I see. OK, so after this one they'll get together in October. A lot of folks think because of the election, the Fed will sit out that one as well.

ROSENSWEIG: Watch out in November, though.

HEMMER: Yes?

ROSENSWEIG: I think we are still driving this economy a little faster than the speed limit, and I think he feels that. On the other hand, monetary policy is a medicine that works only after a time delay, and he gave us six shots, you know, in the past year. So I think he's going to wait to see how those shots take effect over the next few months. So I think we'll be cool today.

HEMMER: And, Jeff, this is argued in many circles, whether or not the Fed does have the ability to control growth and control inflation. And, again, you mentioned they've tried to do it for 14 months now. Do they have their finger on the pulse to dictate what happens with the national economy?

ROSENSWEIG: They're probably the biggest game in town. And, you know, if you think about it, they're doing a great job, so they do have their finger on the pulse. The stock market's still quite high, we have record employment, record employment growth, inflation is low. That's why I think he should just stay cool and just declare victory for a while, we've done a good job.

But they have, at this point, engineered something of a soft landing. There's not the euphoria we saw in some markets before, people bidding on houses, you know, real estate going wild. I think maybe it's time to see if they can declare victory and just relax for a little while.

HEMMER: Interesting comment there, just because some people think Alan Greenspan is the Tiger Woods of the economy, they talk about having our cake and eating it too. And apparently you agree with those, right?

ROSENSWEIG: Well, he's done a great job. His predecessor, Paul Volcker, who I'd worked for when I was at the Fed, has also done a great job. He had to bring out the inflationary expectations that were in our system. And now those inflationary expectations are out of there.

I think when you look around, you also look at Larry Summers, the Treasury secretary. We've got a very smart team in place, and we've had one in place for a while. And I think we're, right now, the new economy and the world's best economy.

It is the time for people just to relax, though. If we get too goosey in the stock market, I think Greenspan has the courage even to raise interest rates in October, even before an election, if he felt like there was a euphoria building up once again.

HEMMER: In the 10 seconds left: You mentioned the stock market. Where do we go between now, then, in the next meeting in October, then again in mid-November?

ROSENSWEIG: We're going to go a little higher. People will be happy that there isn't any movement today. There'll be a little bit of some buying opportunities out there. On the other hand, it's time for people to think about some global diversification. Our stock market's had a big run. It's going to be bumpy from here on out.

HEMMER: Always good advice there. Jeff Rosensweig, come on back, OK?

ROSENSWEIG: Love to.

HEMMER: Nice to speak with you. Thank you, Jeff.

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