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Traders See 50% Odds Fed Will Cut Rate by Half Point Lynn Thomasson and Eric Martin Odds the Federal Reserve will cut interest rates by half a point next week surpassed 50 percent for the first time, according to trading in futures contracts, reflecting concern banks face more losses on securities tied to subprime loans. Chances the central bank will lower its target for overnight loans between banks to 4 percent surged more than 25-fold during the past week after policy makers froze assets in a state-run investment account for Florida schools and analysts forecast deeper losses at the world's largest investment banks. ``The general consensus is economic growth is going to slow down in the next couple of quarters, maybe a little more aggressively than initially thought,'' said Michael Cuggino, who oversees $1.5 billion as president of Permanent Portfolio Family of Funds in San Francisco. ``It makes sense they might go a little further'' with cutting rates.
The Fed has already lowered borrowing costs by 0.75 percentage point since September as mounting credit-market turmoil and slowing growth threatened the country's six-year economic expansion. Policy makers make their next rate announcement on Dec. 11. Odds of a half-point cut, which were 2 percent a week ago, reached 52 percent as of 4:17 p.m. in New York.
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