Greenspan

Greenspan remarks send ripples through markets

By Richard Beales and Jennifer Hughes in New York

Financial Times

Updated: 3:12 a.m. ET Feb. 9, 2006

Alan Greenspan was still making waves yesterday after remarks he made at a private dinner leaked out, providing the markets with new talking points as investors wait to see how his successor, Ben Bernanke, settles in at the Federal Reserve.

Mr Greenspan stepped down last week as chairman after 18 years at the helm of the Fed. He is believed to have spoken on Tuesday night to a private gathering organised by Lehman Brothers. While his comments have not been made public, reports of what he said led some to view further rate rises by the Fed as more likely.

The former Fed chairman was reported to have said the US economy was in better shape than he had previously thought.

The dollar rose slightly and Treasury bonds dipped on Wednesday after the remarks spread around trading floors. But most observers said the impact of Mr Greenspan's remarks was modest.

"If Greenspan had conveyed more – if he said something we hadn't known or suspected already – then there would have been more reaction in the markets," said Marc Chandler, global head of FX strategy at Brown Brothers Harriman. "The dollar was already well bid before he spoke."

"He has said before the [bond] market doesn't have enough risk priced into it," added John Roberts, managing director for rates at Barclays Capital.

Some observers questioned the ethics of Mr Greenspan speaking on policy-related matters so soon after leaving office.

"What makes some red in the face is that he can speak about Fed policy and the economy just days after leaving the Fed when his insights are most relevant and freshest and impact markets," said David Gilmore of FX Analytics.

Others, though, were more focused on Mr Greenspan's likely continuing influence at the US central bank.

"The Street is focusing on what he said and what it means for the Fed, not the fact that he spoke," said one trader.