Market News International - Former Federal Reserve Governor Lyle Gramley said Monday he sees a "90% probability" that the Fed's policymaking Federal Open Market Committee will cut the federal funds rate by 50 basis points at its meeting Wednesday. By mid-year, Gramley said he expects the funds rate to have been cut to at least 5%. The funds rate has been at 6% since a 50 basis point reduction on Jan. 3. Gramley, appearing on CNBC television, said the FOMC has "nothing to lose" by easing 50 basis points instead of 25 basis points and potentially a lot to lose if it does not. The Mortgage Bankers Association consulting economist said the economy is either in or on the verge of recession, so that there is no risk of "overstimulating." He added he sees no risk of an inflation flare-up or a dollar drop if the Fed cuts rates aggressively. What's more, with markets heavily expecting a 50 basis point move, Gramley warned "we're going to lose some of the improvement in financial conditions we've gotten since Jan. 3" if the Fed cuts rates only modestly. Pointing to declining consumer confidence, faltering business investment and a manufacturing sector already "in recession," Gramley said "the only question is whether we can avoid dragging the rest of the economy into recession." Housing could hold the key, he said. Gramley, who served on the Fed Board in the early 1980s, said there may be Fed policymakers who will question the need to cut rates another 50 basis points, but he predicted that "in the end all of them will come around." Beyond Wednesday, Gramley said the funds rate needs to "get down to at least 5% by mid-year. If that estimate is wrong it will be lower rather than higher." Gramley said the economy is in for "six months of a very soft patch, possibly a recession." First quarter GDP growth is apt to be "zero, and it might be negative," he said.