How low will the Federal Reserve rate cut go?

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At today’s Federal Reserve announcement, it is not a question of whether they cut interest rates, but by how much.

For a committee so intent on communication matters, they seem to keep everybody guessing. In September, they surprised many by cutting by one-half point instead of one quarter.

The timing of last week’s intermeeting three-quarter-point rate cut is subject to much armchair-quarterbacking, as it came only in response to a correction in global stock markets, those of which in the emerging economies of the world were long overdue for a pullback, given their high valuations and the slowing growth in developed economies.

And while betting men, or at least speculators, are wagering that the Fed will cut by an additional half-point this week, this is a Fed that is becoming increasingly hard to read. A half-point cut would take the federal funds rate to 3 percent, which would be the lowest since June 2005.

At least a one-quarter-point move is expected, as it is a long haul until the Fed’s next meeting March 18. If the Federal Reserve moved in an insufficient fashion now, only to need another intermeeting rate cut, the Fed would have serious credibility issues. But the Federal Reserve has shown a willingness to cater to the demands of Wall Street, and the committee just might do it again by cutting rates a half-point.

In addition to the regularly scheduled Federal Open Market Committee meeting that concludes today, there is a boatload of economic data on tap. The most significant of these are (in chronological order): the first look at fourth quarter economic growth as measured by Gross Domestic Product, December personal spending and the January employment report.

The GDP figure is released today at 8:30 a.m. Eastern. While this is just the initial figure — it will be revised twice more — this number will go a long way toward telling us just how much slower the economy was growing at the end of 2007 or, as some people assert, whether the economy was, in fact, contracting during the fourth quarter. A sufficiently ugly number, say, growth of less than 1 percent annualized in after-inflation terms, could prompt a half-point cut. Personal spending for December will be released Thursday and the all-important employment report comes Friday morning.

Coupled with personal income and spending figures Thursday comes a little something known as core PCE inflation. That stands for core Personal Consumption Expenditures inflation, and it is the price gauge most closely watched by our beloved Fed. The ISM Index, or Institute for Supply Management Index, on manufacturing comes Friday.

We will learn a lot about our economy this week.