This article is from the source 'bbc' and was first published or seen on . It will not be checked again for changes.
You can find the current article at its original source at http://news.bbc.co.uk/go/rss/-/1/hi/business/6999821.stm
The article has changed 21 times. There is an RSS feed of changes available.
Version 4 | Version 5 |
---|---|
Fed to ponder interest rate cut | Fed to ponder interest rate cut |
(about 2 hours later) | |
US interest rate-setters are gathering to decide whether to cut rates for the first time since mid-2006. | |
Most people expect the Federal Reserve to cut rates 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. | 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. | |
Inflation figures | |
But there was better news for those concerned about inflation with the Producer Prices Index (PPI) for August showing a bigger than expected fall. | |
The Bureau of Labor Statistics said that the measure of the prices paid to producers of goods and services in the US fell by 1.4%, which was the biggest fall since October 2006. | |
"The August PPI was good news," said Gary Thayer, chief economist at AG Edwards and Sons in St. Louis. | |
"There was a decline in energy prices that helped pull the overall index down and core inflation looks relatively modest," he added. | |
'Won't deliver' | 'Won't deliver' |
By cutting rates the Fed would be boosting the US economy by making it cheaper to borrow money Q&A: US interest rate decision | By cutting rates the Fed would be boosting the US economy by making it cheaper to borrow money Q&A: US interest rate decision |
The Fed is set to make its announcement at 1415 EDT (1815 GMT) 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. | |
There is also anticipation over what Mr Bernanke will say 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. | |
But the first of those results, from Lehman Brothers, came in better than expected, suggesting the banks have not been hit as hard as had been thought. | |
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. |
Have you been affected by the sub-prime mortgage crisis? | Have you been affected by the sub-prime mortgage crisis? |