* 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 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
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
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
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
For a summary of recent comments by Fed policy-makers, see