Economists predict cut in US rates
The cost of borrowing in the US is expected to come down sharply tonight, in a move that could boost hopes of an April interest rate cut in the UK.
Alan Greenspan, chairman of the US's Federal Reserve, is forecast to shave either 0.5%, or even 0.75% from US rates in a bid to kick-start the slowing American economy.
A move of that magnitude would bring the cost of borrowing in America down to 5% or 4.75%, and would follow the two half-point cuts implemented in January.
Last night, Wall Street's Dow Jones Industrial Average rallied in expectation of today's announcement, while in London the FTSE-100 Index of top UK companies is moving strongly ahead.
Mr Greenspan's decision will also come after Japan's move yesterday to cut rates, bringing the cost of borrowing effectively to zero, in a bid to revitalise its flagging economy.
In the UK, economists are split over whether the US will opt for a half-point or three-quarter point cut.
Geoff Dicks, economist at the Royal Bank of Scotland, predicted a 50 basis point (0.5%) cut, saying: "The equity markets has psyched itself up to expect 75 but the economy needs 50."
Lorenzo Codogno, head of eurozone economics at Bank of America, said: "We are looking for 50, although we recognise there is a possibility for 75." In the UK he expects a small quarter-point cut in April and says a cut in the US will make a stronger case for easing of rates in the UK.
But HSBC expects US rates to drop by 75 basis points, saying that although the economic data to date "probably only justifies a further 50 basis point cut at this point in time" there are other considerations that suggest the US could vote for a 75 point cut.
The US rate decision is due at 7.15pm GMT.
