Why the Fed Just Might Stand Pat

WASHINGTON: Suddenly, a rate cut doesn't sound like such a sure bet. The markets got one look at some signs of inflation Tuesday and promptly slumped, perhaps realizing that in Alan Greenspan's office, the recession alarm bells have stopped ringing. TIME senior economics reporter Bernard Baumohl says the U.S. economy is still growing, the U.S. stock market is back over 9000, and what's more, the world economy -- from newly bailed-out Brazil to newly free-spending Japan -- has seemingly settled into a hopeful stability. What exactly is Alan Greenspan supposed to cure?

"The Fed's first two cuts have done the trick," says Baumohl. "If Greenspan stands pat, it's reassuring -- it means he thinks things are fine. If he cuts, he sends the signal that he's still worried, and that could actually rattle the markets." Of course, things aren't really fine; the recent recoveries of markets in Korea and Thailand are probably illusory, and Japan's stimulus packages have a way of evaporating before they hit the economy. That may yet prompt a cut, but Greenspan seems more likely to wait until the Fed meets again on Dec. 22. The good times should last at least until then.