Pimco's Kiesel see another 50 bps cut next week

NEW YORK (Reuters) - The Federal Reserve may cut benchmark interest rates by another half percentage point next week after cutting rates by three quarters of a point on Tuesday, said Mark Kiesel, a portfolio manager at Pacific Investment Management Co.

The Fed on Tuesday slashed the federal funds rate to 3.50 percent in a surprise intermeeting decision. It also cut the discount rate by the same amount, to 4 percent.

"The Fed has to be aggressive," Kiesel told Reuters. "They're trying to catch up right now, but they still have more work to do. It wouldn't surprise me if they go another 50 basis points next week."

"We have three things going on right now that the Fed has less control over," said Kiesel, from his Newport Beach, California office:

"Housing is going down, stocks are going down and the labor market is deteriorating. That's three strikes and you're out."

"The Fed was behind the curve and they're trying to play catch up," he added.

Fed fund futures now indicate a 74 percent perceived chance for another half-point cut next week, which would send benchmark rates down to 3 percent. A quarter-point cut has been fully priced in next week. There are 100 basis points in a percentage point.

(Reporting by Walden Siew; Editing by James Dalgleish)