Federal Reserve Alan Greenspan, whose words are difficult to interpret in the best of times, may have come across as too pessimistic about the economy's chances for recovery in a recent speech.

Financial investors originally were sure the Fed chairman was signaling more rate cuts were on the way to help a struggling economy. Now they are not so certain.

"I think the bond market realizes it probably overreacted to Chairman Greenspan's remarks," said Sung Won Sohn, chief economist at Wells Fargo in Minneapolis. "If you look at the speech, it was pretty balanced, citing growing signs of a recovery but also warning of risks going forward."

Investors can place bets on the future direction of the federal funds rate, the key interest rate the Fed controls, through a federal funds futures index traded at the Chicago Board of Trade.

Before Greenspan delivered his speech in San Francisco on Jan. 11, the futures market put the odds of another Fed rate cut at around 25 percent. However, after the speech, those odds shot up to 75 percent. But by the end of this week, they had declined to around 33 percent.

Part of the problem may have been that before Greenspan's speech, his first on the economy since October, Wall Street had gotten too optimistic about the economy based on a number of more positive economic indicators in recent weeks.

That meant Greenspan's remarks, in which he talked about continued "significant risks" going forward, caused the market to overreact the other way. The Dow Jones industrial average lost 80 points the day Greenspan spoke.

"The market's assessment of the economy before Greenspan's speech was overly bullish and the market expected Greenspan to confirm that optimism," Sohn said Saturday. "Chairman Greenspan disappointed by throwing some cold water on that optimism."

Greenspan's earlier drafts of his Jan. 11 speech were more optimistic, raising worries inside the Fed that the comments would be interpreted as removing all possibilities of further rate cuts, according to unnamed Fed sources quoted Saturday in the Washington Post.

Because of this concern, the speech was revised to add more pessimism, but Fed officials now believe the markets over-interpreted the pessimism, the newspaper said, quoting the sources as saying Greenspan was likely to argue at the Jan. 29-30 meeting that rates should be left unchanged.

Richard Yamarone, an economist at Argus Research in New York, said Saturday that Greenspan is doing nothing more than showing his normal caution, indicating that while there are reasons to believe the recession is about to end, there is uncertainty over how strong the recovery will be.

"Greenspan just wanted to send a message that we are not out of the woods yet," Yamarone said. "That way if the Fed does not cut rates at the end of this month, the markets won't over-interpret that decision as signaling that the Fed is definitely through with cutting rates and the next move will be a rate increase."

Last year, the Fed cut rates 11 times, pushing the funds rate, the interest that banks charge each other, down to a four-decade low of 1.75 percent.

Yamarone, who said he believed the recession will be shown to have ended in December, said he is not expecting Fed rate cuts at the January meeting.

But Sohn and other analysts said they believed the Fed will go ahead and cut rates a 12th time, as an insurance policy if nothing else. Sohn said that probably will be the Fed's last rate reduction.

By contrast, Michael Evans, chief economist for American Economics Group in Washington, said Saturday he believed the central bank will keep cutting rates as long as the unemployment rate, now at a six-year high of 5.8 percent, continues to rise.

Evans said the economy, as measured by the gross domestic product, probably will turn positive in the first three months of this year, but the recovery will be so weak that unemployment will keep rising until late summer. Many analysts believe the jobless rate will approach 7 percent, still below the 7.8 percent hit as a result of the last recession, in 1990-91.

"The single most important economic indicator politically is the unemployment rate. Politicians of both parties and Greenspan know this," Evans said.

Greenspan will get a chance to end some of the confusion over his Jan. 11 speech when he appears Thursday before the Senate Budget Committee to tell Congress his views on the economy.