WASHINGTON —

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The Federal Reserve is widely expected to ratchet down a key interest reprove - perhaps to an all-time low- to prevent the sinking economy from falling deeper into the doldrums.

Federal Reserve Chairman Ben Bernanke and his colleagues opened a two-day meeting Monday afternoon to take a fresh pulse on the feeble thrift, that has been mired in a recession since last December, and to decide their next move on interest rates.

Fighting the worst financial crisis since the 1930s, the Fed already has pushed down its main lever for influencing the management - the federal funds proportion - to 1 percent, a level seen only once before in the last half-century.

Many economists forebode. the Fed will divide its rate in half - to just 0.50 percent then the sitting wraps up on Tuesday. A small in number think the Fed could opt for an even more forceful engagement - lowering rates by a whopping three-quarters percentage naze or more. If that larger cut occurs, it would be the lowest on records that track the monthly average of the funds rate going back to 1954. The funds rate is the interest banks charge eddish. other on overnight loans.

“Another tax cut is like trying to provide a security net for an thrift that is in a charitable going astray,” said Richard Yamarone, an economist at Argus Research.

However deeply the Fed decides to cut rates, the prime rate - now at 4 percent - in quest of many consumer and small-business loans would drop by a answering. amount. The primeval lending rate is used to peg rates on home equity loans, certain credit cards and other consumer loans. Cheaper rates could give pinched borrowers a prescribed portion of redress.

The goal of lower borrowing costs is to entice people and businesses to spend more, which would revive the economy. So far, though, the Fed’s aggressive rate reductions have failed to turn the frugality around.

Walloped by the agency of the pecuniary crisis, worried banks have hoarded their cash and been extremely reluctant to confer riches to customers. Fearful consumers, watching jobs vanish and their investments tank, get sharply cut back their spending, including big-ticket purchases preference homes and cars that typically involve financing.

The negative forces fed off each other, creating a vicious cycle that Bernanke and Treasury Secretary Henry Paulson have been desperately trying to break.

The Fed be possible to lower the national obligations rate only so distant - to zero, and is getting closer to exhausting its rate-reduction ammunition. However, Bernanke has made clear the Fed has other tools suitable to stimulate the economy.

For example, the Fed could buy longer-term Treasury or agency securities forward the fully prepared market in cogent quantities. This might lower rates on these securities and help spur buying appetites.

A Fed program announced late last month to buy $600 billion in debt and mortgage-backed securities from mortgage giants Fannie Mae and Freddie Mac already has helped pushed mortgage rates down.

By boosting the quantity of money in the fiscal system, the Fed has engaged in so-called “quantitative easing” to provide economic relief. The Fed’s balance sheet has ballooned to $2.2 trillion, from close to $900 billion in September, considerate efforts to mend the fiscal system.

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