Is the Fed finished cutting rates?, The Wall Street Journalis asking this morning.

Federal Reserve officials started the new year describing the economy as showing tentative signs of hitting bottom, but still facing numerous risks, says the WSJ. Last week, in public and private they indicated the markets may have read too much pessimism into those remarks. In shifting their tone, the officials appeared to signal that they are leaning toward not cutting rates at the end of the month, but also may not raise them for at least several months.

A decision to stand pat is by no means certain, but it would mark the end to one of the most aggressive rate-cutting campaigns in the Fed’s recent history.

In a speech in San Francisco 10 days ago, Greenspan cited “tentative indications” the recession is ending but also “significant risks” such as weak business investment and profits and the threat to consumer spending from previous losses of stock wealth, rising unemployment and the recent rise in mortgage rates. Investors took the litany of negatives to mean the Fed chief was questioning whether the economy had really turned — not merely questioning whether the recovery would be as strong as stock and bond markets seemed to think. Some Fed officials privately expressed surprise at the negative interpretation given to his remarks.

So did administration officials, who perceived more optimism in private meetings with Greenspan than the speech conveyed. On Tuesday, Treasury Secretary Paul O’Neill, who talks to the Fed chief several times a week, said on CNBC, “I think if someone had asked [Mr. Greenspan] to characterize what he was trying to convey, I think he would have said he was on the positive side. I think he’s probably a little surprised that everyone read negative when the intention was more neutral to up.” Greenspan will get a chance Thursday to fine-tune his message when he testifies on the economy to a Senate panel.

Other officials also sounded a more upbeat note last week. “Stimulative policies, in conjunction with the normal equilibrating dynamics of the economy, are likely to promote a rebound before too long,” Fed Vice Chairman Roger Ferguson said Wednesday. Al Broaddus, president of the Federal Reserve Bank of Richmond, Va., said last week, as he had the previous week, that he was concerned the economy could recover more slowly than most economists think. But he added a passage to his speech describing how the Fed’s credibility in keeping inflation low had made last year’s “aggressive” rate cuts possible, “and consequently, we should take care to maintain our credibility going forward” — an apparent warning about cutting rates too much.

The stream of commentary from Federal Reserve Bank presidents and Fed governors has whipsawed markets. Investors started the year putting the odds of one more quarter of a percentage point cut at the Fed’s meeting Jan. 29-30 at less than 20%. After Greenspan’s speech, the odds rose to 60%. But after last week’s flurry of reinterpretation, they dropped back to 40%.

An end to the easing campaign isn’t a done deal. Some Fed officials consider the recovery talk premature and may advocate one more “insurance” cut. But many others say the Fed has done plenty by slashing its target short-term rate to a 40- year low of 1.75% in December from 6.5% at the beginning of last year.