MCLEAN, Va., Aug. 22 (UPI) -- The U.S. Federal Reserve will likely cut interest rates next month, most economists in a survey published Wednesday said.
Thirty-five of 37 economists surveyed this week by USA Today said they expected the Fed would cut the federal funds rate -- the rate banks charge each other for overnight loans -- by a quarter of a percentage point in September, the newspaper said.
Two said they expected a rate cut this month.
Unless the stock market experiences renewed turmoil, "Why not be cool and collected and wait until the September meeting?" Putnam Investments Chief Economist David Kelly said.
Fed policymakers have kept the federal funds rate at 5.25 percent since June 2006.
To ease a credit crunch stemming from a spiraling subprime mortgage market, they lowered the discount rate Friday. That is the rate the Fed charges banks for direct loans.
The federal funds rate has a more direct economic impact than the discount rate by influencing borrowing costs to consumers and businesses.
Most economists surveyed lowered their economic forecasts this year, saying housing-market troubles will drag on longer than they earlier thought, USA Today said.
They said the U.S. economy had a 25 percent chance of sinking into a recession this year and a 20 percent chance in 2008.