The United States could still have a hard economic landing despite aggressive interest-rate cuts and the likelihood of lower taxes. Bank of America (Asia) chief executive Samuel Tsien Wai-kee said such a scenario would mean two consecutive quarters of negative growth and, if this occurred, it would be in the third and fourth quarters of this year. The US Federal Reserve moved twice within a month on rates, slashing the federal funds rate by 1 per cent. Its chairman Alan Greenspan has talked of further cuts as the world's largest economy slows to 'almost zero'. Such a slowdown has a broad and negative impact on export-dependent Asian countries, but economists said the rate cuts - mirrored in Hong Kong yesterday with a 50 basis point drop - would at least boost domestic sentiment as the year progressed. Mr Tsien expected the rate-slashing policy to show up in the real economy in 'maybe a quarter's time'. 'That will show up in consumer spending . . . that will increase,' he said. Generally, Hong Kong residents borrow HK$1.2 million to buy their homes and a full percentage point reduction in borrowing rates translates to an extra HK$700 in their pockets each month. While this is good news, it does not necessarily mean these home owners will spend the extra HK$700 while they still live in a deflationary environment. 'We believe about 18 per cent of Hong Kong's home owners are negative equity home owners . . . this 18 per cent represents about 180,000 families who are mainly middle-class families whose spending is very important for the economy,' Mr Tsien said. 'But when inflation starts to reappear in Hong Kong, the situation will ease and . . . people will accept that equity loss is equity loss and they'll start spending again.' Yesterday Reuters reported economists saying Hong Kong's retail sales likely eased in December, but lower interest rates should help buoy weak consumer sentiment. Retail sales - a key barometer of consumer confidence - are expected to have fallen an average 1.4 per cent in value terms year on year and 0.4 of a per cent in volume, after growing only slightly in November. 'The contraction this time will be mainly due to the higher base in December 2000 when a lot more people were staying in Hong Kong for the millennium and spending more money than this year,' HSBC (HK) chief economist George Leung told Reuters. December retail sales data are being released on Tuesday. Bank of America expects 2 per cent inflation this year, with rate-cut benefits outweighing weakening US demand, ensuring Hong Kong can weather the storm.