5 June 2001, 14:58  U.S. rate cuts unlikely to boost business investment: JP Morgan's Warner

SINGAPORE (AFX-ASIA) - Further cuts in interest rates are unlikely to boost U.S. business investment and will probably have more of an impact on consumer spending, JP Morgan Chase & Co chairman Douglas Warner said.
Speaking after the International Monetary Conference, Warner said the U.S. market is going through a consolidation phase. He said capital investment over recent years has been higher than what the economy actually needs going forward. "We need to consolidate around years of very substantial business investment.
"There's almost no amount of interest rate reduction that will encourage someone when they have too much (credit) to put yet more on the ground."
Asked if there are any signs business demand for credit will pick up in the short-term, he said: "I don't think so, no." He said once the market has adjusted to the consolidation phase, he sees a "pretty healthy situation ... It's not without risks but it's our best guess for now."
The correction in the level of business investment, which coincides with continued cuts in U.S. interest rates and proposed tax rate reductions, makes for a "tricky period.
"Actions taken in the monetary arena ... will have an impact particularly on the consumer while the rest of the correction continues," he said.
He said it is important that the "shock" of corporate earnings warnings and job cuts does not translate into a fall in consumer confidence.
"Fortunately (at the moment) the consumer in the U.S. is continuing to perform pretty well, spending and his confidence is still at a pretty high level," he said.

© 1999-2024 Forex EuroClub
All rights reserved