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BlackRock sees fed funds at 3.5% or less

Conferences

The Federal Reserve will keep cutting interest rates to help stabilize credit markets, regardless of whether the US economy enters recession, a top asset manager at investment firm BlackRock Inc. told Reuters on Monday.

Bob Doll, global chief investment officer for equities at New York-based BlackRock, said at the Reuters Investment Outlook Summit that a combination of Fed action and fiscal „band-aids” should help pull credit markets out of their recent crisis. Still, chances of a recession are now about one in three, up from one in four coming into this year, given the credit problems and the mature US expansion, he told Reuters. Recession „is not our mainline scenario, but it is a possibility and we have to talk about it,” Doll told the Reuters Summit.

The extent to which tighter credit standards swamp the overall economy, especially the two-thirds to 75% represented by consumer spending, remains an unknown, he said. „The center of the pebble in the pond was subprime leveraged mortgages, but the ripple effect has touched almost everything now,” Doll told Reuters. The Federal Open Market Committee is likely to lower its benchmark lending rate by 25 basis points, to 4.25%, when it meets on Tuesday for the final time in 2007.

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