Feds Poised To Cut Interest Rates

By Stewart Douglas

The Federal Reserve is today poised to slash interest rates, with many analysts predicting they could slash the prime rate of lending by up to two incremental steps in order to bring some stability to financial markets.

The Federal Reserve will begin its talks tomorrow, which are scheduled to last for a day, with the result expected by tomorrow evening GMT.  Analysts are forecasting with some certainty that the Federal Reserve will cut rates to stimulate growth and alleviate some of the pressure currently on the sub-prime market.

The move will make borrowing cheaper, which should in the first instance help reduce the number of repossessions and foreclosures in the volatile sub-prime sector.

It is hoped that this will be sufficient to help allow lenders to regain liquidity and get themselves out of the financial problems reported over the last few weeks.

Also, by cutting rates the Reserve will help foster economic growth and business development, by boosting consumer spending and making the credit environment more favourable to borrowing and investment.

Markets around the world have been thrown into turmoil over the last few weeks as a result of ongoing unrest within the sub-prime.  Tomorrow’s announcement will be closely anticipated by investors and business across the world, as a potential first step towards more formal stability on world exchanges.

The Federal Reserve have maintained interest rates at their current 5.25% level for around 14 months - a policy many have criticised in the wake of the sub-prime sector.  By cutting rates, the Federal Reserve will initially buoy Wall Street trading, whilst also helping to return some investor confidence to the markets.

Analysts are hoping that the rates cut will bring the prime rate down to 4.75%, and help give markets that much needed boost towards more stable trading, whilst creating a suitable environment for growth.