Jury Still Out as to Whether or Not Fed Will Cut Rates

Today is the last day of the Federal Reserve meeting where the Fed is still expected to lower rates despite unexpected signs of strength in the economy.

The government released this morning the gross domestic product that surprised everyone by growing 3.9 percent in the third quarter. As reported earlier this week forecasters estimated a 3 percent increase in the gross domestic product for the 3rd quarter. However despite the overestimated performance economists predict that the Federal Reserve will still cut overnight interest rates by a quarter of a percent lowering it to 4.5 percent. The Federal Reserve has offered few clues as to what they will do when they announce their decision around 2:15 pm today. Although Randall S Kroszner and Frederick Mishkin, two of the five board members for the Federal Reserve,  in meetings that occurred in the previous weeks both acknowledged the fact that the economy was still hurting from the damage from the subprime crisis and that it would take some time to recover from this.

There is still some second guessing about what the Federal Reserve will actually end up doing. The fact that the gross domestic product did so well, means that overall the economy is doing well. The Federal Reserve has made it abundently clear that they are not willing to nor is it their responsibility to bail out investors that were hurt by the lack of due diligence by investors into the products that they were investing in. On top of this with the US dollar at the lows that it has reached & with rising energy prices the Federal Reserve will be more reluctant to keep the rates the same as they are. Even with this in mind though the market has already priced out a quarter reduction in rates and it would receive a hit if the Fed did not lower rates today.

To read more about the Fed is seen cutting key rate by a quarter point head on over to CNBC.