More Interest Rate Cuts Coming?

The Federal Reserve is hinting that more interest rate cuts might be needed to offset the deterioration in the credit markets leading to deeper problems for the housing sector and overall economy.

The central bank lowered its key federal funds rate – an overnight bank lending rate that affects how much consumers pay for credit cards, home equity lines, auto loans and other forms of credit – by a quarter of a percentage point on Dec. 11 to 4.25 percent.

That marked the Fed’s third consecutive rate cut since September as the central bank attempts to deal with the subprime mortgage meltdown, which has caused cash-strapped consumers to default on their loans and banks to report billions of dollars in losses tied to bets on bad mortgages.

Traders are now betting that a rate cut at the Fed’s next meeting, a two-day session that concludes on Jan. 30, is certain.  The question is simply how big of a cut it will be.

What do you think?  Will the Fed cut rates again on January 30th?  If so, how much?  .25?  .50?  Tell us what you think and why?  We’d love to hear from you.  Use the comment link below.  Your email address will not be published here for your protection.