US Rate Cut Towards Zero Expected

The US Federal Reserve is expected to cut rates again from an already historical low of 1 percent. It is expected to decrease to .5 percent or possibly .25 percent. With these cuts, the policy makers at The Fed are running out of options. Other tools they have would be buying debt backed by home loans.

It was the failure of the housing market that caused the problems in the US to begin with, but an increase in demand in that sector could boost the economy. Another way to battle deflation is to use quantitative easing, which is when a central bank prints money and puts it in an economy. Deflation becomes more of a risk if interest rates are expected to decrease, as is the case in the United States.

Rates were at 5.25 percent in September 2007.