[Benjamin]

The Fed is likely to cut the federal funds target rate to 4.25% and the discount rate to 4.5% from 5.0%.

Economists said almost nothing has gone right for the central bank since the last FOMC meeting on Oct. 31. Economists had hoped that the financial markets would gradually improve after remaining calm through October.
"But that calm gave way to new storms," Resler (chief economist at Nomura Securities) said at a news conference

Commercial banks seem to have quit lending to each other in order to protect their capital. This will lead the Fed to change terms on the use of the discount rate, Moran said.
The narrow spread may entice more banks to use the Fed for their short-term borrowing needs. Some banks have been using the Federal Home Loan Banks to get short-term loans.
But Steven Cecchetti, a finance professor at Brandeis University, questioned whether a federal funds rate cut would help banks lend to each other.
"The big question is whether further moves on the funds rate are going to actually do any good," Cecchetti said.
"Why does lowering the funds rate help one bank in their attempt to borrow from another bank," he said.
Fed officials have said another problem might be the "stigma" for banks if they borrow from the central bank.
He said the central bank should only take steps to encourage more lending at the discount window such as lengthening the terms of the loans from 30 days to 90 days.
Hawkish comments from some Fed officials a few weeks ago about the dangers of inflation seem to argue against a more aggressive rate cut by the central bank.
The unemployment report released last Friday by the government also showed enough strength to argue against a half-point cut, economists said.
But some economists, including the Citibank economic team, are still projecting a half-point rate cut.
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The U.S. economy is likely to slip into a mild recession in 2008, said economists at Morgan Stanley, which is the first major Wall Street firm to predict a recession.