Will the Federal Reserve Cut Rates Again in December?

Jean-Michel Six, Standard & Poor’s chief European economist, stated today at a London banking conference that he expects the Fed funds rate to reach about 3.5 percent by late summer in 2008.

Six also stated that the probability of a US recession over the next 12 months is estimated out at 40 percent and economic growth is fore casted at 1.8 percent in 2008.  Anything below 2.0 percent for the US announced by the GDP is a very low speed.

T his forecast from Six comes after the Federal Reserve lowered it’s US economic growth forecast drastically yesterday. It now forecasts US growth to slow in 2008 somewhere between 1.8 percent and 2.5 percent. This is a drastic drop from the previous estimate in June of 2.5 percent to 2.75 percent.

Minutes from the Federal Reserve’s October meeting showed the rate cut to 4.5 percent on the 31st was a close call. The unemployment rate around the December 11th meeting is going to be the key factor in deciding whether or not rates will be cut again.

To read more about the S&P expects fed to cut rate head on over to CNBC.