Fed reconsiders interest rate cuts

September 16, 2008 4:55:40 AM PDT
The Federal Reserve holds a policy-setting session today.

Analysts say the chances of a rate cut are growing, whether it comes today or later this year.

If the Fed were to cut its benchmark rate, the prime lending rate for millions of consumers and businesses, which is now at five percent, would drop by a corresponding amount. The prime rate applies to certain credit cards, home equity lines of credit and other loans. The Fed's key rate and the prime rate are at four-year lows.

Even if the Fed doesn't lower rates, analysts think the central bank could switch signals and suggest it could cut rates sooner down the road.

The recent retreat in oil prices and improved readings on wholesale prices give the Fed more leeway to lower rates if needed or at least hold them steady. In June, the Fed halted its rate-cutting campaign out of fears that low rates could fuel inflation.


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