Fed Rate Cut to 1% Expected

With Inflation fears fading, 'the issue now is how bad the recession will be'
By Jim O'Neill,  Newser User
Posted Oct 29, 2008 8:44 AM CDT
A pedestrian walks by an electric market board with an image of Federal Reserve Board Chairman Ben S. Bernanke in central Tokyo on Tuesday.   (AP Photo/Katsumi Kasahara)
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(Newser) – Worries about inflation are taking a backseat to recession fears as the Federal Reserve today is likely to lower its benchmark rate another half-point to 1%, with the possibility it could go to zero by June if the economy doesn’t rebound, reports Bloomberg. “The issue now is how bad the recession will be,'' said one expert.

Commodity prices, oil, and consumer spending all have plunged recently making inflation, once a major concern, moot. In a little more than a year, the Fed has dropped the interest rate repeatedly from 5.25% in failed efforts to spur the economy. Former Fed governor Lyle Gramley says if the economy slides further, “zero,” a level last seen in 1958, “is a possibility.”