What Will Bernanke Do Today?

Federal Reserve officials meeting today aren’t expected to make any changes to the federal funds rate, though that could change in a market as jittery and unpredictable as the one we are experiencing.

WSJ: The case for a quick rate cut: Continued market turmoil could hurt an already weak economy. Mortgage rates fell last week after the government’s takeover of mortgage giants Fannie Mae and Freddie Mac, but market turmoil could push rates up for both mortgages and other consumer loans.

The Fed has taken pre-emptive action repeatedly over the past year, cutting its interest-rate target as protection against a deeper economic downturn. The failure of Lehman, the rapid takeover of Merrill Lynch & Co. by Bank of America Corp. and continuing concerns about AIG underscored the risks.

Many Wall Street investors are essentially begging the Fed to cut interest rates to boost confidence and reduce some of the turmoil. By the end of Monday, futures markets put the odds at two out of three that the Fed would lower its benchmark federal-funds rate, currently 2%, by a quarter percentage point Tuesday. Merrill Lynch economist David Rosenberg predicted a half-point cut.

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