By John S. McClenahen How low will the Fed go? Federal Reserve Board Chairman Alan Greenspan and his colleagues on the interest-rate-setting Federal Open Market Committee (FOMC) will do whatever they need to do to boost U.S. economic growth in the months ahead, believes Bruce Steinberg, chief economist at Merrill Lynch & Co. Inc., New York. That means they may cut the influential federal funds rate to 5% by midyear -- although David Wyss, chief economist at Standard & Poor's DRI in Lexington, Mass., doesn't foresee a 5% rate until the end of 2001. Following yesterday's 50-basis-point cut, the federal funds rate is now at 5.5%, a remarkable full percentage point lower than it was on Jan. 1, just a month ago. Clearly the Fed and many economic analysts are counting on monetary policy to reverse a surprisingly steep six-month drop in U.S. GDP and get the economy growing faster. By several accounts, including DRI's, U.S. manufacturing is already in recession. But how about the rest of the U.S. economy? It's probably not in recession, at least if you go by the classic definition: two consecutive calendar quarters of actual contraction of the economy. Preliminary estimates from the Commerce Dept.'s Bureau of Economic Analysis put fourth-quarter 2000 economic growth at 1.4%. And there's an uneasy consensus among economists that each of this year's first two quarters will post some growth -- though perhaps very narrowly. A notable exception to that consensus judgment, however, is the cautious and often-bearish Levy Institute Forecasting Center, Mt. Kisco, N.Y. Its analysts figure that a recession in the U.S. "probably" began last November -- and they're putting the probability of an economic recovery beginning before 2002 at only 30%. In the meantime, one thing is certain. FOMC members will be carefully reviewing economic data -- Including the rapidly rising number of manufacturing layoffs -- during the next seven weeks and could again lower short-term interest rates on Mar. 20, their next scheduled meeting.