All eyes on Fed ahead of next meeting
A radical shake-up on Wall Street and heavy losses in financial markets have recast the debate for Tuesday’s Federal Open Market Committee meeting to set interest rate policy.
Fed officials will assemble as a storm rages over the global financial system, overshadowing discussion of such bread-and-butter issues as the medium-term growth and inflation outlook.
As recently as Friday, analysts had expected the Fed to keep benchmark interest rates steady on Tuesday as it weighs a sputtering economy and an ebbing of inflation pressure.
On Monday, however, bets that the Fed will be forced into a quarter-point cut to the federal funds rate, to 1.75 percent from 2 percent, were rising paydayloans. Dealers now see more than an even-money chance of a rate cut.
“Fed views have swung dramatically in response to the gut-wrenching developments,” said Marc Chandler, currency strategist at Brown Brothers Harriman in New York.
The FOMC held rates steady when the panel met in June and August, after lowering them in April. That cut bought the fed funds rate down by a cumulative 3.25 percentage points from mid-September 2007.
Following are some factors policy-makers are considering:
FINANCIAL INSTITUTIONS: