How Low Will Bernanke Go?

Fed meets Wednesday to decide if another rate cut is needed right now
By Jim O'Neill,  Newser User
Posted Jan 24, 2008 9:29 AM CST
Federal Reserve Board Chairman, Ben Bernanke, speaks in Washington in this Nov. 14, 2007 file photo. (AP Photo/Caleb Jones, File)   (Associated Press)
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(Newser) – The Fed’s emergency three-quarter percentage-point cut Tuesday to the short-term interest rate was a boon to US markets, but whether the Fed will go lower in its interest-rate lambada remains to be seen. Most analysts expect a half-point cut, to 3%, at the Fed's meeting Wednesday, reports the Wall Street Journal; some see the possibility of another three-quarters. 

“The Fed is in catch-up mode,” said one. A cut of either size would make the Fed's combined moves the steepest cut since 1982. Experts predict a Fed rate as low as 2.25%, depending on soon-to-be-released economic growth figures, but warn the Fed won’t drop as far as in the early 2000s, when the 1% rate contributed to creating a housing bubble.