The Federal Reserve is micro-managing the economy this summer, and we find its actions better than its words.

Back in mid-July, when the Fed was required to tell Congress what it thought the economy was doing and how it should respond, Alan Greenspan, its owlish chairman, told the House Banking Committee he saw no evidence of a double-dip recession. The central bank's next big move, possibly next year, he said, should be a tightening aimed at fighting inflation.

Then, 10 days ago, the Labor Department reported that 51,000 workers had dropped off corporate payrolls in July, and suddenly the economic recovery seemed more fragile. The Wall Street Journal reported that corporate profits shrank 25% in the second quarter, and its survey reinforced doubts. Then Chrysler and General Motors reported disappointing car sales.

All of this evidence of softness in the economy helped bolster the credit markets, and bond prices rose and yields declined. The stage was set for a successful quarterly refinancing of Treasury notes and bonds, but the Fed apparently wanted to make certain.

Last Tuesday morning, the central bank came into the money market and injected temporary reserves into the banking system in action that was universally interpreted to mean it wanted to ease. The move, though nicely timed to help the Treasury sell three-year notes on Tuesday and 10-year notes on Wednesday, nevertheless seemed at odds with Mr. Greenspan's testimony before Congress in July.

But a little time had passed, the economic numbers had been disappointing, and, besides, central bankers are paid to be enigmatic. As it turned out, the Treasury needed all the help it could get -- its sale of 30-year bonds on Thursday was no barn burner. Demand for the bonds was disappointing, and they eased in price in the secondary market on Friday.

What do we conclude from reading these credit market tea leaves? The signs conflict, to some extent, and the 30-year Treasury bond should have attracted more investors if the economy is as soft as the payroll-profit-car sales data suggest.

In this effort to assess the outlook, we are persuaded by the soft-economy, double-dip argument. We think the Fed's easing last Tuesday revealed the central bank's real concerns, as its moves should, and we would not be surprised to see the economy tend to slip back into recession.

Action is eloquence, they say, and the Fed moved responsibly last week.

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