October 29, 2007

Will the Fed Cut Rates Again?

Will the Fed Cut Rates Again?

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Federal Reserve Chairman Ben Bernanke said the central bank's rate cut in September has shown signs of success, but cautioned that lenders and investors must bear responsibility for financial decisions that caused the subprime mortgage meltdown.

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The Fed slashed the federal funds rate, a key short-term interest rate that impacts rates on consumer loans, by a half of a percentage point on September 18. Bernanke said the rate cut, combined with an earlier cut to the symbolic discount rate in August, helped to "reduce some of the pressure in financial markets" and that "the improved functioning of financial markets is a positive development."

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Investors looking for a sign that the Fed may cut rates again at the conclusion of a two-day meeting on October 31 may be disappointed though. Bernanke indicated that the Fed "was prepared to reverse the policy easing if inflation pressures proved stronger than expected."

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What do you think?� Do you think the Fed will lower rates again on October 31st?� Or do you think they will sit tight for now?� Tell us what you think by clicking the Comment link below.

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