(MarketWatch) 1:33 p.m. EDT 9-15-08 Fed will cut target rate a half percent Tuesday: MerrillSubmitted by Jim Brown on Mon, 09/15/2008 - 18:32
NEW YORK (MarketWatch) -- The Federal Reserve will cut its target overnight borrowing rate by a half percentage point to 1.50% at its meeting tomorrow, said Merrill Lynch economists David Rosenberg and Drew Matus in a note Monday. "In the current environment, the Fed may feel the need to get in front of the situation with a more aggressive move" instead of the standard quarter-point reduction, they said. Merrill (MER:Merrill Lynch & Co., Inc MER 17.06, +0.01, +0.1%) , one of the 19 primary security dealers that trade directly with the New York Fed, was bought by another dealer, Bank of America (BAC:bank of america corporation
BAC 26.55, -7.19, -21.3%) overnight. "Recent events suggest a large deleveraging of the banking system is picking up steam and suggests the risks to the economy are entirely concentrated in the growth outlook," Rosenberg and Matus said. Merrill analysts had previously expected the Fed to reduce rates in the first quarter as inflation subsided. "Inflation concerns will take a backseat, or move to the trunk," they said. The Fed may also remind markets that the discount window and other liquidity facilities are available.
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