- NEW YORK (AFP) - The US
Federal
Reserve is prepared to cut interest rates further if needed after slashing
key rates a full percentage point since the September 11 terror attacks,
a senior official said Tuesday.
-
- The timing of an economic recovery, widely expected for
early 2002, remains shrouded in uncertainty, US Federal Reserve Board vice
chairman Roger Ferguson warned.
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- The terrorist onslaught had disrupted sales, air travel
and production, while also threatening business and consumer sentiment,
he told a Bond Market Association conference.
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- "However, opposing these contractionary impulses,
should they occur, will be a more expansionary fiscal policy," he
said.
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- "Moreover, monetary policy has been and will
continue
to be responsive to rapidly changing circumstances."
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- People might cut back in consumption and businesses might
curtail investment as they worried about the direction of the economy,
Ferguson said.
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- "Many private sector economists are forecasting
a brief decline in economic activity during the second half of this year,
followed by a recovery early next year," he added.
-
- "Whether this outlook becomes reality depends
importantly
on the aforementioned household and business confidence."
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- President George W. Bush has asked lawmakers to pass
a tax cut of more than 60 billion dollars.
-
- Congress has already passed a package of 40 billion
dollars
to help rebuild New York and a 15-billion-dollar rescue for the
crisis-stricken
US airline industry.
-
- The Federal Reserve has also slashed interest rates twice
since the attacks, each time by half a percentage point, bringing the key
federal funds target to a 39-year low of 2.50 percent.
-
- "It is too soon to judge the strength of these
various
forces -- consumer and business behavior, monetary and fiscal policy --
and how they will balance out," Ferguson said.
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- But the longer-term prospects for the US economy remained
sound, with flexible markets, enterpreneurial spirit, a well-educated work
force, and major advances in high technology.
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- Spending appeared to be recovering already from the
initial
reduction, Ferguson said.
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- "Although severely disrupted by the attacks,
financial
market operations and activity have nearly recovered, with the exception
of some strains in the repo market," he added.
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- "The initial direct disruptions proved to be
short-lived."
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- Figures released by the Federal Reserve showed that US
industrial production slumped 1.0 percent in September, the 12th monthly
reduction in a row. It was the longest decline since World War II.
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- Naroff Economic Advisors president and chief economist
Joel Naroff said producers were unlikely to ramp up production until they
believed consumers were ready to spend.
-
- "Tax rebates and lower interest rates have added
dramatically to disposable income. However, further rate cuts may do very
little to add to those gains," the economist said.
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- "The money is there and more is coming, though that
apparently means little in this uncertain and fearful period, " he
added. "Since I am not a mass psychologist, I cannot say if spending
will jump any time soon."
-
- Top economists expect US gross domestic product (GDP)
to fall into a recession in the second half of this year, according to
a survey released last week by data publisher Blue Chip Economic
Indicators.
-
- Next year, however, GDP would bounce back to show an
annualized 1.4 percent growth rate in the first quarter and then 2.9
percent
growth in the second quarter, said the survey of 51 economists taken
October
3 and 4.
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