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http://www.fxstreet.com/news/forex-news/article.aspx?StoryId=dee7fc94-7abe-4124-b719-681db21bcab6

Markets see possibility of 100 basis point US rate cut next week - analysts
Fri, Mar 14 2008, 15:38 GMT
http://www.afxnews.com

LONDON (Thomson Financial) - Markets have moved to price in the possibility that the US Federal Reserve could cut interest rates by a full 100 basis points next week, analysts said.


It comes after US investment bank Bear Stearns announced its liquidity position had "significantly deteriorated" in the last 24 hours.


The Federal Reserve and JPMorgan Chase have said they will be providing financing to the stricken company.


The Fed has also announced it is "monitoring market developments closely" and will "continue to provide liquidity as necessary to promote the orderly functioning of the financial system".


"The market is now pricing in a significant probability that the Fed could cut rates by 100 basis points next week," said Divyang Shah at Commonwealth Bank.


John Ratcliffe at Thomson IFR Markets said a 50 basis point cut is now completely off the table and markets are betting on at least a 75 basis point cut, if not 100.


"Seventy-five or a hundred basis points is the call now," he said.


The Fed is scheduled to meet on Tuesday next week, but talk has even surfaced that they could announce an emergency cut outside of this meeting.


"The comment from the Fed that they are watching market developments closely suggests that even though the Fed meeting is next week the Fed could still cut inter-meeting," he said.


"The central scenario is for the Fed to cut rates following their meeting next week but other scenarios should not be ruled out in the current environment," he said.