UBS Warburg's Harris: FOMC "On Hold" After Next Meeting

By John S. McClenahen The next scheduled meeting of the Federal Open Market Committee (FOMC), the Federal Reserve Board unit that sets the influential federal funds rate, is still two weeks away. Expectations remain that Chairman Alan Greenspan and his FOMC colleagues will cut U.S. short-term interest rates again -- this time by only 25 basis points. However, some economists, such as Maury Harris, UBS Warburg's chief U.S. economist, are already looking beyond the FOMC's June 26 and 27 confab. "Beyond June 27th, both we and the market are looking for the Fed to go on hold," he relates. "There are good reasons to believe growth will start to pick up before too long, although whether much improvement will be apparent by the [following] Fed meeting on Aug. 21st is debatable." In the meantime, Harris expects the just-enacted individual income tax cuts to begin adding between 0.5% and 1% fiscal stimulus to GDP beginning July 1.

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