U.S. Housing Slowdown Will Lead Fed to Cut Rates, Pimco's McCulley Says

(Bloomberg) -- A slowdown in the U.S. housing market
and losses in mortgage-linked bonds will lead the Federal Reserve
to cut interest rates, said Paul McCulley, a bond fund manager at
Pacific Investment Management Co.

``The recession we have in the housing market is going to be
a very long, protracted affair,'' McCulley said in an interview
from Pimco's office in Newport Beach, California. ``That's going
to lead the average consumer to recognize that he needs to save
more out of current income, which is going to weaken consumption
in the economy.''


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