AP
Fed may cut interest rates again after all
Tuesday September 16, 7:57 am ET
By Martin Crutsinger, AP Economics Writer 
Turbulent financial markets could be setting stage for Federal Reserve to cut interest rates

WASHINGTON (AP) — With turbulence hitting financial markets as a global credit crisis claims heavyweight victims, suddenly the possibility of a reduction in interest rates by the Federal Reserve is back on the agenda.
 
Economists were split on whether the central bank would actually cut a key rate when officials meet Tuesday, but it was widely agreed that the Fed will at least open the door to reducing rates in the weeks ahead if financial markets do not stabilize.

Wall Street had a very tough day Monday, with the Dow Jones industrial average tumbling by 504 points in the steepest slide since the September 2001 terrorist attacks.

“Given the meltdown in markets, a rate cut is becoming fairly possible,” David Wyss, chief economist at Standard & Poor’s in New York, said in a comment echoed by other economists.

That represents a significant change from just a few days ago when the widely accepted view was that the Fed was finished cutting interest rates and the next move would be to start raising rates, but probably not until next year.

However, the stunning developments of the past two days as the 14-month credit crisis claimed its biggest victim yet have led economists to rethink their views. Lehman Brothers filed for bankruptcy protection on Monday after marathon talks over the weekend failed to produce a willing buyer for the nation’s fourth largest investment bank.

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