What the Fed is considering at its meeting

NEW YORK (Reuters) - Wall Street expects the Federal Reserve to cut short-term interest rates again this week, as conditions in credit markets and housing slump may still threaten the economic outlook.

The Fed is expected to cut the benchmark federal funds rate, now at 4.75 percent, by at least 25 basis points. At its last meeting, it made a bold 50-basis-point cut in the federal funds rate and the discount rate. The discount rate is now 5.25 percent.

Following are some factors Fed policy-makers are considering:

MARKETS

Credit market disruptions appear to have calmed a bit, but many Fed officials note conditions remain far from normal.

Analysts say structured investment vehicles, or SIVs, contaminated by subprime mortgage debt securities gone bad in the housing market meltdown, loom large in the policy debate.

Top U.S. banks, with the backing of the U.S. Treasury, announced a plan on October 15 to set up a $75 billion fund aimed at shoring up the short-term lending market and preventing the dumping of billions of dollars' worth of subprime securities, particularly those held by SIVs.

ECONOMY

A slew of closely watched data will be released shortly before and after the FOMC meeting.

Economic growth is expected to have been firm in the third quarter. Real gross domestic product, to be released on Wednesday, is expected to have risen 3.0 percent compared with 3.8 percent in the previous quarter.

Monthly payroll data will be released on Friday. U.S. employers were expected to have increased hiring by 80,000 jobs in October, after a revised increase of 110,000 in September.

The Institute for Supply Management (ISM) survey for October will be released on Thursday, with the median forecast at 51.5. The index of national factory activity in September was at 52.0, expanding at its slowest pace since March.

Housing continued to be weak and other data were mixed.

Retail sales rose a bigger-than-expected 0.6 percent in September and sales excluding automobiles and gasoline gained 0.2 percent.

The Reuters/University of Michigan Surveys of Consumers' October figure on consumer sentiment was 80.9, down from a preliminary reading of 82 and a final September reading of 83.4.

Industrial production rose 0.1 percent in September, in line with expectations.

Durable goods orders fell surprisingly by 1.7 percent in September, but non-defense capital goods orders excluding aircraft rose 0.4 percent.

Housing starts in September fell 1.02 percent to a 1.191 million-unit annual rate, the slowest since March 1993, while building permit activity also tumbled.

Total existing home sales fell 8.0 percent in September to a record low 5.04 million-unit pace.

INFLATION

The price index for personal consumption expenditures excluding food and energy costs will be released on Thursday, and is expected to be similar to August's year-on-year increase of 1.8 percent.

The core consumer price index rose a modest 0.2 percent in September.

U.S. producer prices increased by a larger-than-expected 1.1 percent in September but a key measure of core inflation at the producer price level rose by a slight 0.1 percent.

OTHER

U.S. crude oil futures prices hit a record above $93 a barrel on Monday.

The dollar has continued to fall against major currencies, hitting a record low against the euro on Monday.

RECENT COMMENTS

Fed Chairman Ben Bernanke, on October 15: "Conditions in financial markets have shown improvement since the worst of the storm in mid-August, but a full recovery of market functioning is likely to take time, and we may well see some setbacks."

"The ultimate implications of financial developments for the cost and availability of credit, and thus for the broader economy, remain uncertain."

"For now, the Federal Reserve will continue to watch the situation closely and will act as needed to support efficient market functioning and to foster sustainable economic growth and price stability."

Fed "Beige Book" summary of economic conditions, on October 17: "The pace of growth decelerated since August."

(Additional reporting by John Parry)