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Plosser: Economy will recover without cuts

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PHILADELPHIA, Jan. 8 (UPI) -- The U.S. economy will recover without any cuts in interest rates, a regional Federal Reserve president said Tuesday.

In a speech delivered in Philadelphia, Philadelphia Fed President Charles Plosser said he thought the anemic economy will "improve appreciably" by the second half of 2008 before any effect of additional rate cuts would be felt, MarketWatch reported.

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Plosser said he could support further interest rate cuts if the economic outlook becomes "substantially weaker" than he expects.

"Since monetary policy's effects on the economy occur with a lag, there is little monetary policy can do today to change economic activity in the first half of 2008," he said. "I am still optimistic that the economy will improve appreciably by the third and fourth quarters of 2008, and that is when any monetary policy action today will begin to have noticeable effects."

The committee meets Jan. 29-30. Analysts and markets expect at least a quarter-point cut in the federal funds target rate to 4 percent, MarketWatch said. Some are projecting an aggressive half-point cut to 3.75 percent, based on the slowdown in job growth and in the manufacturing sector.

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