What the Fed is considering at its meeting

By Tamawa Kadoya

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