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Economy: Another Fed Rate Cut Anticipated Tuesday

March 15, 2008
By JEANNINE AVERSA, AP Economics Writer

WASHINGTON – Desperate to aid an economy in crisis, the Federal Reserve is ready to deliver yet another big interest rate cut.
Federal Reserve Chairman Ben Bernanke testifies before the House ... 
Federal Reserve Chairman Ben Bernanke testifies before the House Financial Services Committee about the latest measures to heal the U.S. economy, on Capitol Hill in Washington in this file photo from Wednesday, Feb. 27, 2008. Desperate to provide relief, the Federal Reserve is ready to deliver another big rate cut. Just how deep of a cut is something Bernanke and his central bank colleagues will be weighing when they meet Tuesday, March 18. Some economists are predicting a half-point reduction, while investors and others are hoping for a more hefty, three-quarters cut. (AP Photo/J. Scott Applewhite)

How big? One-half of a percentage point, some economists say. Investors and others hope for even more, a three-quarters cut or perhaps a full point, given the turmoil on Wall Street. It will be a close call, Fed watchers say.

The speculation ends Tuesday afternoon after Fed Chairman Ben Bernanke and central bank policymakers have met.

Whatever the decision, for a growing number of analysts, one more rate reduction will not be the lifeline that pulls the country back from the brink of the first recession since 2001.

Experts in this camp believe the economy is shrinking now because of the fallout from the housing and credit debacles. Businesses are shedding jobs, Wall Street is convulsing, energy prices are skyrocketing and people are reluctant to spend. Yet these economists say lower interest rates should help cushion the blows of a recession.

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