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The briefcase is ... neutral?
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May 18, 1999: 11:08 a.m. ET
Anticipating Greenspan's stance can come down to observing his briefcase
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NEW YORK (CNNfn) - Analysts clamoring for clues on the direction of interest rates have one last resort: the briefcase theory, which holds that the size of Alan Greenspan's briefcase offers insight into upcoming changes in lending policy.
If Federal Reserve Chairman Alan Greenspan is pushing to raise rates, he'll walk into the Federal Open Market Committee meeting with a large briefcase, because the Fed chief will need documentation to back up his case.
If the briefcase is light, it's a signal Greenspan wants to keep rates unchanged.
The case, in brief, for leaving rates unchanged?
As Greenspan walked into Tuesday's FOMC meeting, his briefcase appeared light by historical standards, supporting expectations of most analysts who see the FOMC leaving the federal funds rate at 4.75 percent.
The federal funds rate has been at that level since Nov. 17. Before that, the Fed cut rates three times, each by a quarter of a percentage point, to bolster the economy from overseas turmoil.
But last week's Labor Department report that consumer prices rose 0.7 percent in April -- the biggest rise in more than 8-1/2 years -- means inflation is suddenly a concern again.
This has caused a few analysts to predict a rate tightening Tuesday. Others, however, see the Fed shifting its bias, or inclination, to raising rates at its next meeting six weeks away.
The Fed's Open Market Committee began its meeting on time Tuesday morning. An announcement on the committee's stance is expected later in the day.
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