By Yoo Choonsik Tue Oct 16, 2:39 AM ET
SEOUL (Reuters) - The Federal Reserve will probably cut U.S. interest rates again over the next few months and Asian central banks have room to do so once their exports lose steam, Standard & Poor's economists said on Tuesday.
Asian countries have sharply increased trading inside the region and would weather to some extent the slowing U.S. economy, or if necessary they will be able to lower interest rates to boost domestic demand, they told reporters in Seoul.
"There are two pieces of good news. The first piece of good news is that the Federal Reserves is reacting," David Wyss, global chief economist at the ratings agency, told a news conference.
"The second piece of the good news is that the rest of the world is ignoring the slowdown in the U.S., with growth remaining strong particularly in Asia."
He said Asia -- home to the world's two fastest-growing economies of China and India -- would probably post about 7 percent growth in 2008, although a U.S. recession would chop 1 percentage point off the forecast.
A slowing U.S. economy would prompt the Federal Reserve to act in the near future, Wyss said.
"We expect another quarter-point cut probably not in October, more likely in December or January, in response to weaker income and economic data," Wyss said.
The Federal Reserve slashed U.S. interest rates by a hefty half-percentage point on September 18 in a bold bid to shield the economy from a housing slump and financial turbulence, taking the benchmark federal funds rate down to 4.75 percent.
ASIA TO WEATHER
But Wyss said the Bank of Japan would probably hold the country's interest rates at least until the end of this year before raising them early next year.
"Not this year," he said on the sidelines in response to a question about the BOJ's timing on an interest rate rise.
"I think that will be because of a mix of domestic politics and the financial market turbulence," he said, without elaborating on the politics.
Subir Gokarn, S&P's Asia-Pacific chief economist, said at the conference the Asian economy has grown more resilient against a slowing U.S. economy as a result of efforts to expand trade with countries in the region.
"In the longer term, Asian economies are beginning to leverage regional growth through expanding regional integration," Gokarn said.
"Most Asian economies are at or close to the peak of their interest rate cycles, providing opportunities to offset global risks with expanding domestic demand."
S&P forecast South Korea's economic growth would slightly accelerate to between 4.5 percent and 5.0 percent in 2008 after reaching between 4.3 percent and 4.8 percent this year, presentation material showed.
South Korea's economy, Asia's fourth-largest, expanded 5.0 percent in 2006 and the central bank expects this year's growth rate to reach close to 5 percent.
Gokarn declined to forecast the Bank of Korea's interest rate policy.