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'Symbolic' fed rate cut expected


'Symbolic' fed rate cut expected


The US Federal Reserve is widely expected to lower the cost of borrowing again at the end of its two-day policy meeting now underway.

But the markets will really be wanting to hear from Fed chairman Ben Bernanke on what other action the central bank will take to get credit flowing again. Economists believe that the benchmark interest rate will be to cut to an all-time low of 0.5 percent from the current one percent. But the move would be mostly symbolic as analysts said slashing interest rates has so far failed to spark economic activity. The problem is the Fed’s low rates have not yet filtered into many consumer and business loans and the US economy continues to slump. As well as banks being reluctant to lend money, consumers are fearful that they are going to lose their jobs and are seeing their investments lose value. As a result they have sharply cut back their spending, particularly large purchases like homes and cars for which they have to borrow money.

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