O'Neill says Fed's aggressive rate cuts have not had impact

 

US Treasury Secretary Mr Paul O'Neill yesterday said he still did not expect the US economy to fall into recession, noting this year's aggressive Federal Reserve interest rate cuts have not yet had their full impact.

The Fed has cut rates five times so far this year and its policy-making Federal Open Market Committee was scheduled to meet tomorrow and on Wednesday, amid financial market expectations that rates will be cut again.

Mr O'Neill, asked on ABC whether he still believed the economy would avoid a recession, replied: "Well, so far, I think that's where we are, yes."

He said it was not unusual for a six-month lag from the time rates are cut to the impact on the economy. "We're approaching that now, so I think things are unfolding in a way one would expect from history," Mr O'Neill said.

"We're going through a process that's not unexpected. We have had an over-expansion in the investment sector, and there's some pull-back, and the economy's feeling the effects of that right now," he said.

"But I think we're not doing badly for the kind of correction that we're in right now."