Possible Market direction this week: Positive

Fed Interest Rate Cut Seen This Week
Sunday September 16, 7:27 pm ET By Jeannine Aversa, AP Economics Writer
Fed Ready to Lower Rates This Week for First Time in More Than 4 Years

WASHINGTON (AP) -- For the first time in more than four years, the Federal Reserve appears ready to lower interest rates to prevent a housing meltdown and a painful credit crunch from driving the economy into a recession.

A rate cut would affect millions of borrowers, with the intention of getting them to spend and invest more, which would revitalize the economy.

In one of their most important and anxiously awaited decisions, Fed Chairman Ben Bernanke and his central bank colleagues meet Tuesday to determine their next move on interest rates. Those policymakers are widely expected to cut an important rate, now at 5.25 percent, by at least one-quarter of percentage point. Some analysts predict a bolder step, a half-point reduction.

The Fed drops the rate, then the prime lending rate that commercial banks charge many individuals and businesses would fall by a corresponding amount. It now is at 8.25 percent.
"It's no longer a debate over whether they will ease but by how much," said Mark Zandi, chief economist at Moody's Economy.com. "The economy is soft and getting softer," and the Fed has come under economic and political pressure to act.

Should the Fed go with a quarter-point cut, analysts expect policymakers will lower the rate again in October and in December, their final meeting of the year.