More Fed Cuts Likely, Says UBS' Harris

ByJohn S. McClenahen Although Chairman Alan Greenspan and his colleagues on the Federal Open Market Committee (FOMC) continue to believe the long-term prospects for U.S. productivity and economic growth are favorable, in the short-term they're concerned about economic weakness. "The risks are weighted mainly toward conditions that may generate economic weakness," the FOMC said Sept. 17 as it lowered the influential federal funds rate 50 basis points to 3%, the eighth time it has reduced the federal funds rate this year. However, Maury Harris, chief U.S. economist at UBS Warburg, New York, believes additional rate cuts are necessary. "We are now calling for [a] 2.5% [rate] by the Nov. 6 [FOMC] meeting. Clearly at its early-October and early-November meetings, the Fed will see enough weakness to justify further easing on each occasion." The next two scheduled FOMC meetings are Oct. 2 and Nov. 6. The final FOMC for 2001 is slated for Dec. 11.