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Fed Doesn't Want Rate Cut— But Markets Do

And they're expecting it. Bernanke's hands tied as Fed meets today

By Jason Farago,  Newser Staff

Posted Oct 30, 2007 7:09 AM CDT
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(Newser) – Ben Bernanke and the rest of the Fed are meeting today to decide whether to cut interest rates again after September's surprise half-point reduction. Bernanke has made it clear that he'd rather not drop rates again. But, as Bloomberg writes, he might not have much of a choice: with home values falling and oil skyrocketing, the markets are desperate for—and counting on—some relief.

Bernanke has given lip service to how "challenging" making policy has been since the start of the credit crunch. But without a cut the Fed risks upsetting the markets and damaging the economy deeper. Economists are speculating that Bernanke will cut rates by a quarter- or even half-point, and federal funds futures prices confirm that traders think the cut's in the bag.

Federal Reserve Chairman Ben Bernanke is shown in this 2006 file photo in Chicago. Bernanke and the Fed are deciding whether to cut interest rates yet again.
Federal Reserve Chairman Ben Bernanke is shown in this 2006 file photo in Chicago. Bernanke and the Fed are deciding whether to cut interest rates yet again.   (Associated Press)
U.S. Federal Reserve Chairman Ben Bernanke is seen at the International Monetary Fund Headquarters in Washington in this Oct. 20, 2007 file photo. (AP Photo/J. Scott Applewhite, file)
U.S. Federal Reserve Chairman Ben Bernanke is seen at the International Monetary Fund Headquarters in Washington in this Oct. 20, 2007 file photo. (AP Photo/J. Scott Applewhite, file)   (Associated Press)
U.S. Federal Reserve Chairman Ben Bernanke waits for the start of the International Monetary and Financial Committee meeting at International Monetary Fund Headquarters in Washington, Saturday, Oct. 20, 2007. Bernanke and the Fed are deciding whether to cut interest rates yet again.
U.S. Federal Reserve Chairman Ben Bernanke waits for the start of the International Monetary and Financial Committee meeting at International Monetary Fund Headquarters in Washington, Saturday, Oct....   (Associated Press)
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The market's sure of a cut, but could they be wrong?
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Ben Bernanke • Federal Reserve • interest rate • credit crisis

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