Commentary: Greenspan: Between The Hawks And A Hard Place

Usually, when the U.S. economy starts rollicking too much, you can count on the Federal Reserve to halt the party before it leaves the economy with an inflation hangover. Not this time. When Chairman Alan Greenspan and his monetary mavens gather on Feb. 2-3, they'll be looking at an economy that's whooping it up: a sizzling stock market, runaway consumer spending, and rising wage pressures. In more tranquil times, the Fed would be debating whether it's time to hike interest rates to cool things off.

But with the global financial system still in fragile condition, the Fed doesn't dare boost rates. "If you just looked at the domestic economy, the Fed would be leaning toward tightening," says former Fed Vice-Chairman Manuel H. Johnson. "Now it has no choice but to keep the economy strong and the stock market up. If it signaled tighter policy, it might set off a bombshell."