New Rate Cut Anticipated from Fed

As the Federal Reserve wraps up a two-day meeting Wednesday, expectations are high that a fresh rate cut is coming. But analysts are divided over how dramatic a reduction is on the way in the wake of last week's big move. David Wessel, economics editor of The Wall Street Journal, explores the Fed's thinking in a conversation with Steve Inskeep.

Fed Expected to Announce Fresh Rate Cut

The Federal Reserve was expected to announce another interest rate cut on Wednesday to stabilize the faltering economy.

Up to a half-percentage point cut in the federal funds rate was expected — that would bring the key benchmark to 3 percent. The Fed's policy-setting Federal Open Market Committee was expected to make the announcement at 2:15pm following its two-day meeting.

Such a move would come close on the heels of last week's surprise three-quarter point cut in the funds rate.

In explaining its aggressive move last week, the Fed said the outlook for economic growth had weakened and downside risks had risen. Policy-makers also said businesses and households

were beginning to feel the pinch of tighter credit.

The economy's weaker-than-expected performance in the fourth quarter — an anemic 0.6 percent growth rate — is likely to be a factor in the Fed's decision.

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