Wall Street is certain the Fed will cut rates to ease the pain of the credit crunch, but how will the market react if the cut by just a quarter of a point?
There is no mystery that the Federal Reserve is going to cut the prime rate on September 18.
There is no mystery that the Federal Reserve is going to cut the prime rate on September 18.
Still, there is some unknown surrounding the September 18 meeting. The big question being, how much the Fed will lower interest rates.
The Fed cut the discount rate by a half of a percentage point, from 6.25 percent to 5.75 percent, on August 17, leading observers to feel that the Fed would also lower the fed funds rate by a half of a percentage point on September 18.
Still, what will happen if the central bank only lowers interest rates by a quarter of a percentage point? Fed watchers said it all depends on what the Fed says in its statement.
Chances are the market would probably not be too happy with just a 25 basis point cut at first. We will see what happens on Tuesday afternoon.
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