Fed stays quiet on rate cut rumor

WASHINGTON (Reuters) - The Federal Reserve on Wednesday declined to comment on speculation in financial markets that the U.S. central bank might cut the discount rate imminently.

Asked about the speculation, which traders said was a factor that brought stock prices off earlier lows, a Fed spokesman declined to comment.

The Fed cut the discount rate, which governs direct Fed loans to banks, by a half-percentage point on August 17 in an effort to keep financial markets from freezing up.

It followed up that move at its last policy-setting session on September 18 with another half-point cut and a matching half-point reduction in the benchmark overnight federal funds rate, its main tool for influencing the economy.

Fed policy-makers meet on Tuesday and Wednesday and are widely expected to lower both rates by at least a quarter-percentage point. The discount rate currently stands at 5.25 percent, while the federal funds rate stands at 4.75 percent.