Forecasters predict more Fed interest cuts

By Jeannine Aversa
Associated Press

WASHINGTON — The Federal Reserve will cut interest rates enough to keep the struggling economy from slipping into a recession this year, economic forecasters say.

The National Association for Business Economics' forecasters, taking part in a survey released Wednesday, "have remained steadfast in their belief that a recession is unlikely," said the association's president, Richard Berner, chief economist at Morgan Stanley.

The survey is based on predictions made by 27 economic forecasters who are members of the association.

"Panelists believe that an aggressive Fed will sustain modest economic growth for the balance of the year and into 2002," Berner said.

The Fed has cut interest rates four times this year, totaling 2 percentage points, in an effort to rejuvenate economic growth. Many economists believe the central bank will cut rates again, probably by another half-point, at its meeting next Tuesday.

The survey was conducted before last week's release of a government report showing that the nation's unemployment rate jumped to 4.5 percent in April from 4.3 percent in March. Businesses also slashed payrolls in April for the second month in a row. The weak jobs report renewed recession fears.

Panelists placed the chances of a recession this year at 35 percent, up slightly from a 33 percent estimate in a previous survey.

Also in Wednesday's survey, forecasters left unchanged their prediction that the economy — as measured by the gross domestic product — will grow by 2 percent for all of 2001. Last year, the economy expanded by 5 percent.

GDP is the total output of goods and services produced within the United States and is considered the broadest measure of the nation's economic health.

Forecasters lowered their estimate of economic growth for 2002, predicting the economy would expand by 3.1 percent, versus a previous estimate of 3.5 percent.