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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