PREVIEW-What the Fed is considering at its meeting
* What: The Federal Reserve's policy-setting Federal Open Market Committee meeting
* When: Jan. 29-30; statement expected around 2:15 p.m. (1915 GMT) on Wednesday
* Expectations for 50 basis point cut in federal funds rate target; size of rate cut may depend on market conditions
By Tamawa Kadoya
NEW YORK, Jan 28 (Reuters) - After a tumultuous week for global stock markets that triggered an emergency rate cut by the Federal Reserve, Wall Street expects the central bank to follow through with more easing this week.
The biggest rate cut in more than 23 years last Tuesday signaled that the Fed will take an aggressive easing stance to prevent the "tail risks" of economic slowdown and financial market turmoil from spreading.
Most dealers expect the Fed to cut the benchmark federal funds rate by 50 basis points to 3.00 percent on Wednesday, while not ruling out a smaller 25 basis point reduction.
"The Fed will likely err on the aggressive side (of easing)," said Dean Maki, chief economist at Barclays Capital in New York. "It is very concerned about addressing downside risks quickly and ... risk is tied into the stock market."
The FOMC will also see some new voting members from this meeting, as regional Fed presidents rotate each year. Some analysts expect a dissent if the Fed cuts, as some members may be uncomfortable about inflation.
Following are some factors Fed policy-makers are considering:
MARKETS/CENTRAL BANK ACTION
The Fed slashed interest rates by three-quarters of a percentage point on Tuesday. It also cut the discount rate by 75 basis points to 4 percent.
The European Central Bank and the Bank of England kept rates steady this month.
On Dec. 12, major central banks including the Fed, ECB and the British, Canadian and Swiss central banks jointly announced steps to address rises in interbank lending rates.
As part of the initiative, the Fed created a Term Auction Facility to provide funds more smoothly to banks. It has auctioned $100 billion worth of funds through the facility, which would continue "as long as necessary to address elevated pressures in short-term funding markets."
Interbank market rates have fallen as year-end funding pressures have eased, and TAF provided an extra source of funding.
Global stock markets continued to falter on Monday on concerns about a weakening economy. U.S. stock indexes have been down more than 10 percent since the start of the year.
Various data deteriorated in December. The unemployment rate jumped to a two-year high to 5 percent in December, and payrolls hardly grew. Fed officials characterized the jobs report as "disappointing." The January jobs report will be released on Friday.
The Institute of Supply Management's index of national factory activity fell to 47.7 in December.
The Philadelphia Fed's index for business activity in the Mid-Atlantic region, seen as a precursor to national activity, plunged to minus 20.9 in January.
Housing starts fell 14.2 percent in December to the lowest pace in more than 16 years while building permit activity also dropped to levels not seen since early 1993.
Retail sales fell unexpectedly in December, stoking concerns of recession.
Preliminary gross domestic product data for the last quarter of 2007 will be released on Wednesday. Economists expect growth to have slowed to a median 1.2 percent.
The Bush administration and Congress agreed on a $150 billion stimulus package, focusing on tax rebates for individuals and families as well as incentives for business investment.
Bernanke said fiscal action could be helpful if done quickly, as fiscal and monetary stimulus together would provide broader support for the economy.
FOMC statement, Jan. 22: "The Committee took this action in view of a weakening in the economic outlook and increasing downside risks to growth.
"Appreciable downside risks to growth remain. The Committee will continue to assess the effects of financial and other developments on economic prospects and will act in a timely manner as needed to address those risks."
Fed Chairman Ben Bernanke, Jan. 17: "Incoming information has suggested that the baseline outlook for real activity in 2008 has worsened and that the downside risks to growth have become more pronounced.
"We stand ready to take substantive additional action as needed to support growth and provide adequate insurance against downside risks."
For a summary of recent comments by Fed policy-makers, see [ID:nN18336216]