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Fed to meet for US rate decision Fed to meet for US rate decision
(19 minutes later)
The Federal Reserve meetsm on Tuesday to decide whether US interest rates should be reduced from 5.25%. 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 in order to focus on controlling inflation. 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.