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Fed to meet for US rate decision | Fed to meet for US rate decision |
(19 minutes later) | |
The Federal Reserve is due to meet to decide whether to cut US interest rates for the first time since mid-2006. | |
Most analysts believe the Fed will cut rates to try to prevent a housing market downturn and the "credit crunch" from severely denting the economy. | Most analysts believe the Fed will cut rates to try to prevent a housing market downturn and the "credit crunch" from severely denting the economy. |
By making money cheaper to borrow, people would spend and invest more, revitalising the economy, they say. | By making money cheaper to borrow, people would spend and invest more, revitalising the economy, they say. |
But some feel that the Fed must leave rates unchanged at 5.25% in order to focus on controlling inflation. | |
A reduction in rates by 25 or even 50 basis points would fuel inflation and lead to the "cheap money" conditions that have brought boom-and-bust to the property sector, they argue., | A reduction in rates by 25 or even 50 basis points would fuel inflation and lead to the "cheap money" conditions that have brought boom-and-bust to the property sector, they argue., |
'Won't deliver' | 'Won't deliver' |
The Fed is set to make its announcement at about 1415EDT (1815GMT) after its one-day policy meeting. | The Fed is set to make its announcement at about 1415EDT (1815GMT) after its one-day policy meeting. |
The market may be disappointed by the announcement from Fed boss Ben Bernanke, said Bernie Schaeffer at Schaeffer's Investment Research. "Expectations for a Fed bailout are running high. It is becoming increasingly clear to me that a minimum of a 50-point cut is needed and that Bernanke is not likely to deliver on it," he said. | The market may be disappointed by the announcement from Fed boss Ben Bernanke, said Bernie Schaeffer at Schaeffer's Investment Research. "Expectations for a Fed bailout are running high. It is becoming increasingly clear to me that a minimum of a 50-point cut is needed and that Bernanke is not likely to deliver on it," he said. |
There is also anticipation over what Mr Bernanke will says in the Fed's economic statement. | There is also anticipation over what Mr Bernanke will says in the Fed's economic statement. |
The impending decision, along with the imminent release of third quarter results from a string of investment bank, has made traders cautious, with US shares sliding slightly on Monday. | The impending decision, along with the imminent release of third quarter results from a string of investment bank, has made traders cautious, with US shares sliding slightly on Monday. |
The Fed started raising rates from their historic low of 1% back in June 2004 to put the brakes on a US economy that was showing signs of overheating. | The Fed started raising rates from their historic low of 1% back in June 2004 to put the brakes on a US economy that was showing signs of overheating. |
They have been on hold at 5.25% since mid-2006 after 17 consecutive rises. | They have been on hold at 5.25% since mid-2006 after 17 consecutive rises. |