Sung Won Sohn, chief economist of Wells Fargo & Co., predicted a 40% chance of recession in his annual state of the economy address yesterday.

The Federal Reserve Board raised rates "too fast and too high" over the past year and a half, prompting an economic slowdown that is likely to continue into 2001, said sohn, speaking to Wells officials.

"The bottom line is that the probability of an econiomic recession next year thas risn to a about 40%. This is about as high a probability as I can go without declaring a recession," said Sohn, adding that a recession may already be underway.

"An insurance policy is needed. The Federal Reserve should cut interest rates as soon as possible and a limited tax cut to cushion the economic slowdown would be helpful." He added that the Fed should have cut rates when it met Tuesday, rather than simply shifting its stance from a bias toward tighteining credit to a bias toward cutting rates.

Sohn said the stock market selloff this year has caused a decrease in the overall "wealth effect" in the nation. That loss of equity, coupled with higher interest rates and energy costs, also wil contribute to slower spending, he said.

Other factors that will hurt the Nation's economy in 2001 are inventory buildup, the higher cost of capital, sluggish retail sales and resulting production cuts, and banks' elevated credit standards.

-- Anonymous, December 21, 2000