Steve Matthews
Bloomberg
October 29, 2008

The Federal Reserve may lower its benchmark interest rate to 1 percent today and signal further reductions to levels unseen since Dwight Eisenhower was president.

  • A d v e r t i s e m e n t

Tumbling commodities prices and weaker consumer spending are slowing inflation, which officials described as a “significant concern” at their last scheduled meeting in September. Tomorrow, the Commerce Department will probably report that the economy shrank at a 0.5 percent annual rate in the third quarter, the most since the 2001 recession, economists predict.

The Fed “will be very aggressive,” said Mark Gertler, a New York University economist and research co-author with Fed Chairman Ben S. Bernanke. “Inflation risks are off the table” and “the issue now is how bad the recession will be.”

He predicted the benchmark rate will be cut by half a point today, matching the median forecast of economists surveyed by Bloomberg News. Bernanke and his team could push borrowing costs to zero by June if the credit crunch intensifies, Gertler said.

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