Alan Greenspan and the rest of the Federal Open Market Committee played it cool and cut the federal funds rate by a half-point Wednesday to 5.5 percent exactly what the markets expected but maybe not what they were hoping for.
But with six weeks before the next Fed meeting, there may be more to come. Because every move comes with words, and listen to these: "Business and consumer confidence are eroding further... requires a rapid and forceful response... inflation contained." Translation: There's a good chance of another between-the-meetings rate cut sometime before March, but until then Greenspan and the boys would like to read a few more tea leaves and not risk sending the 75-basis-point message that the end of the world is nigh.
But first, the National Association of Purchasing Management index due out Thursday, and the next unemployment report. Until then, it seems that caution prevailed on the FOMC board, and you can bet Greenspan got the OK from his colleagues for some unilateral movement if he feels the need.
Which is not to suggest the Fed sat on its hands Wednesday. The half-point cut, thoroughly expected by the markets, did spark a "buy-the-rumor-sell-the-news" mini-slump, but clearly this was not the abject disappointment that a quarter-point drop in the bucket would have been, and the next month should be relatively happy one on the Street. After taking back that roundly criticized (mostly in hindsight) May half-point hike in January, Greenspan has now done it again, lopping off another half-point, and stands ready to pull a February surprise just like January's if the picture continues to darken.
(In keeping with his very sound pledge Tuesday "I had commented out loud about one of the actions he took; that's the last time I'm going to comment" Bush ignored today's Fed move and kept on plowing though the introductions at his first Cabinet meeting. But he sure did talk about tax cuts a lot.)
So the slowdown is still very much on, and the Fed is still very worried about a recession. But new home sales are rising, mortgage rates are falling, and record rates of mortgage refinancing promise to keep pockets filled. Even as consumer confidence plummets, consumer spending has been holding steady, and there apparently wasn't much perceived downside to moving just a little slower than the lead bears this time around.
And this way, nobody panics who wasn't panicked already.