WASHINGTON -- A growing number of U.S. economists are predicting that the Federal Reserve, in the face of a faltering economic recovery, may cut interest rates further from their 40-year lows.

The new outlook is a sharp reversal from just a few weeks earlier, when many experts were expecting a rate hike in response to a strengthening U.S. economy. However a number of economists say they see no change in rates, adding that a move by the fed could be seen as a sign of panic.

The boldest outlook came from Goldman Sachs economists, who see the Fed trimming the current federal funds rate of 1.75 percent by three-quarters of a point by year-end, AFP reported. "We are downgrading our GDP growth and interest rate forecasts," the economists said in a research note. "We are implementing these changes now because recent economic news has confirmed some of our worries that the stock market decline would affect business hiring and investment decisions."

In light of the string of weak data over the past few days, "Fed officials are likely to ease by 75 basis points in the fourth quarter, reducing the target federal funds rate to one percent by year-end," said senior Goldman Sachs economist Edward McKelvey.

"Fed officials have undoubtedly been surprised by the recent weakness, given the tenor of Chairman Alan Greenspan's midyear testimony to Congress," he added.

Goldman Sachs economists do not see the world's largest economy sliding back into a "double dip" recession, but foresee a sluggish growth pace of 2.5 percent in the third quarter and two percent in the fourth quarter.

"Accordingly, although Fed officials undoubtedly share our view that double dip is not the central case, we believe they will want to take out more insurance against that possibility," McKelvey said. "Moreover, the fed staff's analysis of the Japanese experience suggests that in a slow growth, low inflation environment monetary policy should err heavily on the side of excess accommodation."

James Glassman, senior economist at JP Morgan Chase, said a further Fed easing could send a signal of panic to the markets.

He said Fed officials feel that they are "flooring the accelerator" at the moment. So if they cut rates, "they are basically telling you that they are so worried about things that could undermine confidence."

"I think we're going to find the Fed a little more patient here," he said.

San Francisco Federal Reserve Bank Chief Robert Parry said however he believes the U.S. economy remains in the midst of a "modest expansion" despite the downward revisions. Although the path of expansion "does appear to be volatile, I believe it's still intact," he said in a speech Friday. The recent data "don't change my basic view that we're in the midst of a modest expansion."

But Parry added that the Fed would "act decisively" if it appeared the economy was stalling.