24 August 2001, 10:37 Fed seen easing less than 25 basis points for rest of yr - NABE economists
WASHINGTON (AFX) - The Federal Reserve is unlikely to cut interest
rates by more than another 25 basis points for the rest of the year,
according to a majority of members of the National Association for
Business Economics (NABE).
"The NABE panel has clearly come to the conclusion that the Fed has
done nearly enough to jump-start the economy," NABE said in a statement
on its semi-annual economic policy survey of 254 member economists.
Just 10 pct of members in the survey (which was done prior to the
Federal Open Market Committee's meeting earlier this week) expect the
FOMC to lower its key federal funds rate target beyond 3.25 pct in the
next six months.
On Tuesday, the FOMC lowered its federal funds rate target by 25
basis points to 3.5 pct, bringing to 300 basis points the total amount
of monetary easing since the first rate cut on Jan 3.
The NABE economists concluded that overcapacity is now the biggest
problem facing the US economy, "the result of a ten-year capital
spending boom," NABE said.
The second major problem identified was "excessive indebtedness"
for both consumers and businesses.
A declining number of members said high energy costs, and the
potential for energy shortages, was a problem.
Over 80 pct of NABE economists said the tax cut enacted earlier
this year will stimulate growth, although a smaller 56 pct majority
said they actually supported the tax cut.
Some 42 pct said the 1.35 trln usd, 11-year tax cut should have
been smaller.
Overall, the NABE economists gave President George W Bush a rating
of six out of ten for his economic policy performance so far.
Over four in ten of the economists said Bush was right to pull out
of the Kyoto Protocol on global climate change, with nearly half saying
there is insufficient knowledge as yet to make "good climate policy."
NABE economists were split when asked about the Fed's more activist
policy this year, with unusual rate cuts made between FOMC meetings,
and the sharpest rate reductions over six months in over a decade.
A plurality of 45 pct said they were more confident in the Fed's
ability to manage the economy and financial system, while 41 pct said
they were less confident.
"For those who felt more confident, the primary reason was an
appreciation of the Fed's 'quick response' and 'seeming flexibility,'"
NABE said.
A large number of those whose confidence in the Fed had dropped
said the Fed's action this year constituted "too much interference."
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