Many economists are still unwilling to wager that the Federal Reserve will reduce short-term interest rates this year.

Half those questioned in the latest American Banker yield and rate survey said they think the central bank's target for federal funds, the overnight lending rate, will remain 5.5% till yearend.

Fed Chairman Alan Greenspan, who deflated notions of a rate cut in congressional testimony last week, will meet with the central bank's monetary policy committee Sept. 29 to assess business conditions and review the economy's prospects.

"All we can really do is look at his record, and he is very careful, conservative, and prudent," said David Orr, chief capital markets economist at First Union Corp., Charlotte, N.C., who currently expects no change in rates this year.

"I don't think the disruptions in the U.S. financial markets upset Mr. Greenspan all that much, since he has been preaching for two years that there had been insufficient attention to risk," Mr. Orr said.

"My reading of matters is that he is waiting for evidence that deflationary forces in the rest of the world are affecting the average business and average person in terms of the unemployment rate and credit availability," the economist said.

"For the past six months there has been high and accelerating credit growth," he noted. "If the loan losses now beginning to show up in the money-center commercial banks and investment banks raise the risk antennae of the lending community enough to affect credit availability, then the Fed would ease."

Even if the Federal Open Market Committee adopts an easing bias, Mr. Orr said he doubts it would rush to reduce rates.

After next week's session, the committee is not scheduled to meet until Nov. 17.

The central bankers might also take note of the Shadow Open Market Committee, a group of private economists.

It issued its semiannual report last week, urging the Fed not to cut rates right now.

But others think the Fed's timetable may be pushed forward by events.

"There is bound to be a further dimming of economic prospects, slowing employment gains, more U.S. bank losses, and clearer recognition that deflation is a greater threat than inflation," said Philip Braverman, chief economist at DKB Securities USA in New York.

By yearend, he said, a 75 basis-point cut will have been made in the federal funds rate, to 4.75% -and more easing is probable next year.

Given that inflation as measured by the consumer price index is likely to be about 1.5% this year, "a 100 basis-point funds rate cut, to 4.5%, is warranted merely to reduce the real (after inflation) rate to a neutral 3% from the current exceptionally high 4%," he said.

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