Fed may cut rates to new lows

WASHINGTON, Dec. 15 (UPI) -- Economists predict the U.S. Federal Reserve Open Market Committee may cut interest rates to historic lows after a two-day meeting beginning Monday.

Fed chairman Ben Bernanke said on Dec. 1 that cutting federal fund rate , now at 1 percent, was "feasible."

Tuesday's announcement could include a rate cut to an historic low of 0.5 percent or lower, USA Today reported Monday.

The fund rate sets the rate banks charge for overnight lending to each other. It is no guarantee that banks will lower lending rates to consumers, but a lower rate gives banks room to do just that.

Chief economist of National City Richard DeKaser predicted a rate cut of 0.75 basis points to 0.25 percent.

But some feel even a big rate cut will have a minor effect on the economy. Banks have tightened lending and consumers have cut back on spending, reducing the potential benefits a rate cut would have on the economy, the newspaper said.