Fed Eyes Interest Rate Cut

Federal Reserve policymakers are expected to lower a key interest rate for a third time this year to forestall housing and credit market turbulence from further hurting the economy, the Associated Press reported.

Fed governors including Chairman Ben Bernanke will meet Tuesday in their last meeting of the year to assess the economy and decide their next move on interest rates, AP said.

Analysts predict the Fed will trim its key rate, now at 4.5%, by a quarter of a percentage point to 4.25%, with some speculating on the possibility of a half-point cut, AP said.

If the Fed cuts the key rate, commercial banks would lower their prime lending rate, now 7.5%, by a corresponding amount, AP said.