The US Federal Reserve was widely expected to deliver another cut in interest rates today to offer more help to an economy whose growth is being choked by a squeeze in credit.
The Federal Open Market Committee headed by chairman Ben Bernanke was expected to announce a decision around IST 11.45 am today, concluding a two-day meeting.
Financial markets were banking on a half-point cut in the federal funds target to bring the rate to 1.0 per cent, matching the lows of 2003 and 2004.
Some predicted the US central bank, which led a coordinated global rate cut earlier this month, could go even lower in effort to jump-start lending and ease a global credit crunch.
The futures market yesterday was pricing in a 62% chance of a half-point cut.
Yet the market also saw a 38% chance of a deeper cut of 75 basis points that would leave the rate at a historic low of just 0.75%.
Despite concerns about the low rates that fuelled the boom-and-bust housing cycle, analysts say the Fed has little choice but to remain aggressive to avert a serious economic calamity.
"The Fed is staring this recession in the face and while the members know that a cut in rates is not going to do much, it is now all about creating confidence," said Joel Naroff at Naroff Economic Advisors, who called for a half-point cut to 1.0%.
