It is widely expected that the Federal Reserve will cut the Fed funds rate by 50 basis points to 1.00% on Wednesday, the lowest level since June 2004. Fed watchers expect the vote to be unanimous and the accompanying statement to echo the "wait-and-see" approach seen in previous months.
The Federal Open Market Committee (FOMC) meeting follows the co-ordinated rate cut on Oct. 8, when six central banks all cut their respective target rates by 50 basis points.
A joint statement from the banks read: "Inflation expectations are diminishing and remain anchored to price stability. The recent intensification of the financial crisis has augmented the downside risks to growth and thus has diminished further the upside risks to price stability."
As of Tuesday afternoon, Fed fund futures are pricing in a 56% chance of another 50 basis point cut, while the other 44% are looking for a 75 basis point cut.
Among economists, forecasts are less certain. Of the 65 economists polled by Bloomberg, 37 are calling for a half-point cut, 16 are looking for a quarter-point cut, and 11 are predicting the Fed will keep rates on hold at 1.50%. In contrast to the implied market probability, just a single economist is expecting a 75 basis point cut.
By Patrick McGee and edited by Nancy Girgis
�CEP News Ltd. 2008
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