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Another Fed rate cut a possibility

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Scott Jagow: Last time the Federal Reserve met, the Fed cut its key interest rate a half a point. Wall Street cheered, and the markets bounced back for a while.

The Fed meets again today, and investors would love another rate cut — a half-point again if possible. Realistically, they’re thinking a quarter point. But is that what the Fed is thinking? Here’s John Dimsdale.


John Dimsdale: Global Insight economist Brian Bethune says the U.S. economy is in better shape now than it was at the Fed’s last meeting.

Brian Bethune: The best analogy I can think of is, well, the patient’s fever has come down, but the fever has not gone away.

Bethune thinks the Fed will prescribe one more dose of rate cuts this week.

David Malpass, the chief economist at Bear Stearns, agrees:

Malpass: Complicating the Fed’s job, the dollar’s been weak. That adds to inflation. With gasoline and food going up, we’ll be back at 3.5 percent kind of inflation rate. And it’s hard for the Fed to really be aggressive in its cuts in that kind of environment.>

The Commerce Department will reveal the economy’s growth rate just hours before the Fed’s Wednesday announcement. Predictions are GDP grew at a healthy 3-3.5 percent clip — which should ease pressure on the Fed to reduce interest rates.

In Washington, I’m John Dimsdale for Marketplace.

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