Fed poised to cut rates

Fed poised to cut rates
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First Published: Tue, Apr 29 2008. 11 10 AM IST
Updated: Tue, Apr 29 2008. 11 10 AM IST
By Jeannine Aversa / AP
Washington: The Federal Reserve is poised to deliver another interest rate cut to millions of people and businesses this week, although that could be the last break they get for a while.
Fed Chairman Ben Bernanke and his colleagues open a two-day meeting Tuesday afternoon to take a fresh pulse on the U.S. economy and decide their next move on interest rates.
The Fed is widely expected to lower its key interest rate by one-quarter percentage point to 2% at the end of its session Wednesday.
That would mark a modest rate reduction after a recent string of hefty cuts. The Fed is facing a difficult juggling act of trying to shore up the faltering economy while also trying to keep inflation from taking off.
In response to the Fed’s expected action, the prime lending rate for millions of consumers and businesses would fall by a corresponding amount, to 5%. The prime rate applies to certain credit cards, home equity lines of credit and other loans. Both rates would be the lowest since late 2004.
Economists think the Fed may be inclined to leave rates at such low levels possibly through the rest of this year and maybe into next year.
The Fed started cutting rates last September to aid the economy. Worries, however, have grown that galloping food and energy prices could spread inflation throughout the economy. And that is complicating the Fed’s job.
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First Published: Tue, Apr 29 2008. 11 10 AM IST