Fed Set to Make Another Rate Cut
It looks as if the Federal Reserve is set to deliver a small interest rate cut on Wednesday, though the central bank could signal that this is the last in a cycle as officials eye inflation warily.
The Fed has already cut interest rates to 2.25 percent from 5.25 percent in six steps since mid-September in an effort to keep U.S. economic activity going in spite of a credit crunch and a deep housing downturn.
Food, fuel and raw material prices are rising, boosting inflationary pressures, a Fed report said recently.
"This meeting's accompanying statement poses a special challenge for the committee -- justify easing another quarter point to avoid a deeper recession, and simultaneously acknowledging the risk of commodity inflationary pressures," RBS Greenwich Capital analysts David Ader and Ian Lyngen said in a research note.
Interest-rate futures prices imply about an 80 percent probability of a further quarter-point reduction and about a one-in-five chance of no move at all when the Fed wraps up a two-day meeting on Wednesday.
The government reports on first-quarter U.S. gross domestic product Wednesday.
Source: Source: CNBC | Published on April 29, 2008
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