The survey, a collection of data and anecdotes through June
2, is in line with Fed Chairman Alan Greenspan’s assessment of the
economy when he told an international monetary conference last
week that the U.S. economy had “stabilized” while a period of
stronger growth has “not yet begun.” Vice Chairman Roger
Ferguson today said there is no evidence that improving financial
conditions have resulted in stronger growth.
“The unwinding of war-related concerns appears to have
provided some lift to business and consumer confidence, but most
reports suggested that the effect has not been dramatic,” the
survey said. No district suggested its economy had deteriorated
since the last survey on April 23.
Fed policy makers will use today’s survey as a reference when
they meet June 24-25 to review the benchmark overnight bank
lending rate. Wall Street’s biggest bond-trading firms are
unanimous in predicting a cut of at least a quarter-point in the
rate, which at 1.25 percent is already the lowest since 1961.
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The latest survey, compiled by the Federal Reserve Bank of
Dallas as of June 2, provides a look at the economy in the weeks
following the end of major fighting in Iraq.
Fed officials have suggested that heading off price declines,
or deflation, is becoming a priority. Traders interpreted
Greenspan’s comment last week that the “cost of addressing” a
deflationary risk is “very small” as signaling a rate cut.
The Fed is “concerned about deflation, and they are concerned about growth below potential,” said Michael Moran,
chief economist at Daiwa Securities America, a primary dealer in
U.S. Treasuries. “They are going to be willing to ease monetary
policy.”
The U.S. economy grew at a 1.4 percent annualized rate in the
final quarter of last year and at 1.9 percent in first quarter of
2003. U.S. Treasury Secretary John Snow said last night he expects
growth of about 3.5 percent in the second half.
Bloomberg News
