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News > Economy
More dealers see 1/2 point cut
June 15, 2001: 5:14 p.m. ET

Survey: Most still see quarter point interest rate cut, but six see half point
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NEW YORK (CNNfn) - A growing numbers of economists are predicting a half percentage point interest rate cut at the Federal Open Market Committee's upcoming meeting, but the vast majority are still banking on a quarter percentage point cut, according to a Reuters survey Friday.

Six economists, including those at Merrill Lynch, J.P. Morgan and Lehman Brothers, expect a 0.5 percentage point cut in the federal funds rate on overnight banks lending at the June 26-27 meeting, while 19 still expect a 0.25 percentage point reduction, the survey said.

In a June 1 Reuters survey, 19 expected a 0.25 percentage point cut, while three looked for a 0.50 percentage point cut and three expected no move.

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"We had been looking for a 25 basis point easing but now we are calling for a 50 basis point cut which would bring the Fed Funds rate to 3.5 percent," said Merrill Lynch Chief Economist Bruce Steinberg. "The reason we are changing our call is that the economic data continues to deteriorate. There has been a further deterioration in the labor market indicators.

"We think the Fed will need to try to get ahead of this again," Steinberg said. "We think this raises the question about whether there will be any further easings. We do not think this will be it.

"We think it is possible there will be more easings but it will depend on how the economy performs in the next couple of months," he added.

Looking ahead to the FOMC's Aug. 21 meeting, Reuters said 13 dealers predicted a 0.25 percentage point rate cut, 10 saw no move and two did not provide data. graphic

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