Fed Weighs Emergency Rate Cut

As economy deteriorates, inflation becomes less of a concern
By Jim O'Neill,  Newser User
Posted Oct 2, 2008 9:28 AM CDT
Federal Reserve Chairman Ben Bernanke, right, and Treasury Secretary Henry Paulson testify on Capitol Hill in Washington on Sept. 24, 2008, before the House Financial Services Committee.    (AP Photo)
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(Newser) – Mounting fears that the credit crisis and continually worsening economic data will push a stagnant US economy into a severe recession has spurred the Federal Reserve to consider cutting interest rates from their current 2%, the Wall Street Journal reports. Even if the House follows the Senate in passing the $700 billion bailout, some action is likely.

Federal Reserve chief Ben Bernanke last week told Congress that Wall Street’s meltdown would almost certainly hit the general economy. Reports this week showed automakers in particular, but manufacturing as a whole, had their worst declines since 1992 and 2001, respectively. Experts are betting on a quarter- to half-percent reduction in rates this month despite possible inflation consequences.