The News on the Street: The Fed to Cut Big
The question on Wall Street is whether the Fed will make another major cut in lending rates at its regularly scheduled FOMC meeting today. The bet is on a full-point cut in the federal funds rate, to 2 percent, putting the key lending rate indisputably below key inflation gauges. Another cut in the discount rate is also expected.The Fed is expected to announce its decision later today.
The Fed has cut overnight rates by 2.25 percentage points to 3 percent since mid-September as a rise in defaults on sub-prime mortgages has escalated into a financial crisis that this weekend claimed one of Wall Street's most venerable firms, investment bank Bear Stearns, as a victim.
Amid what many analysts say is the worst financial crisis in decades, economists and traders expect the Fed to deliver its biggest rate cut since 1982.
Economists generally agree, saying that a lower federal funds rate will at best help struggling financial firms on the margin avoid bankruptcy.
Published on March 18, 2008
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