Further Fed cuts likely on Kohn comments

Donald Kohn, the vice chairman of the Federal Reserve, has hinted that more rate cuts are needed in order to insure against an economic calamity.

Economic growth in the US is expected to be sluggish until the middle of 2008 before picking up towards the end of the year - a scenario that would make further cuts unnecessary, given the monetary policy lag.

However, Kohn warned that it was possible that trends such as a reduction in exposures, tighter lending standards and higher compensation for