Two More U.S. Interest Rate Cuts, Predicts UBS' Harris

ByJohn S. McClenahen Chairman Alan Greenspan and his colleagues on the Federal Open Market Committee (FOMC) will cut the influential federal funds rate by 25 basis points at each of their next two meetings this year, expects Maury Harris, chief U.S. economist at UBS Warburg, New York. The FOMC is slated to meet on Nov. 6 and Dec. 11. The federal funds target rate is now 2.5%, and if Harris' forecast is correct, it will be at 2% by mid-December. "We are hopeful . . . that amount of easing, combined with fiscal stimulus, will be enough to turn the [U.S.] economy around by the second quarter of 2002," relates Harris. Harris' current forecast has the U.S. economy in recession through the first three months of next year. And while he anticipates inflation-adjusted growth at an annual rate of 3% in the second quarter of 2002, 3.2% in the third quarter, and 3.5% in the fourth quarter, full-year growth next year is likely to be only 0.4% better than this year's.