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Some Banking On Big Interest Rate Cut By Fed

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The Associated Press

Published: October 27, 2008

WASHINGTON - As the economic wreckage piles dangerously higher, the Federal Reserve is prepared to ratchet down interest rates - perhaps to their lowest point in more than four years - with the hope of relieving some of the pain felt by many Americans.

The convergence of a housing collapse and lending lockup has created the worst financial crisis in more than a half-century. With a recession seen as inevitable, if not under way, any Fed cut would be aimed at cushioning the fallout.

All the problems have been feeding on each other. So far, Fed Chairman Ben Bernanke and his colleagues haven't been able to break the cycle.

To that end, Fed policymakers are widely expected to lower the central bank's key interest rate at the conclusion of a two-day meeting Wednesday - the last before Election Day.

Investors and some economists predict the central bank will drop the rate by half a percentage point to 1 percent.

If that happens, it would mark the lowest rate since summer 2004. Others, however, think the rate will be cut by only a quarter-point to 1.25 percent.

The Fed hopes that lower rates will spur people and businesses to spend again, helping to brace the wobbly economy.

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