Policymakers at the Federal Reserve are likely to adopt a wait-and-see approach following three months of interest rate-slicing in a bid to squelch recession, private economists said Tuesday.
But analysts said they had little doubt the central bank will move at the next sign of economic weakness, probably in early March, to push interest rates lower still.``The Fed recognizes that we are in a deepening recession and we have a severe bank credit crunch,' said David Jones, chief economist at Aubrey G. Lanston & Co., a government securities dealer.
Many economists are looking for a strong commitment by the central bank to supply sufficient cash to get interest rates down further and spur banks to resume lending.
One reason for this view is that the central bank remains under heavy political pressure from the Bush administration to do more to fight the recession.
President Bush took the unusual step of calling for lower interest rates in his State of the Union address to Congress last week, and his budget, released Monday, blamed the Fed in part for the recession, contending that the central bank had kept credit conditions tight for the past two years.