Fed may cut rates again after meeting: analysts

WASHINGTON, October 28, 2008 (AFP) – The Federal Reserve opens a two-day meeting Tuesday widely expected to cut key interest rates further as part of an unrelenting effort by the central bank to restore confidence to battered markets.

The US central bank, which led a coordinated global rate cut earlier this month that pushed its target rate down a half-point to 1.50 percent, is seen as trimming the rate another 25 to 50 basis points.

The Federal Open Market Committee headed by chairman Ben Bernanke is expected to announce a decision around 1815 GMT Wednesday at the close of a two-day meeting.

“Recent history tells us the Fed always follows up an inter-meeting rate cut with another reduction at the ensuing FOMC meeting,” said Joseph LaVorgna, economist at Deutsche Bank, who predicted a half-point cut to bring the rate to 1.0 percent, the level from June 2003 through June 2004.

“Some market participants initially believed policymakers would try to reserve some ‘monetary ammunition’ by only cutting rates 25 basis points — a view with which we disagreed given the ‘shock and awe’ tactics the Fed and Treasury seem to have recently adopted.”

Analysts say the crisis that began with a housing meltdown and credit crunch