Market Awaits More Fed Rate Cuts

Updated from March 17

The Federal Reserve is expected to announce more cuts to its key interest rate target Tuesday, one day after the central bank managed to stabilize the stock market as investors struggled to comprehend the stunning collapse of a major Wall Street investment bank.

The Fed, with the help of JPMorgan Chase(JPM Quote), helped Bear Stearns (BSC Quote) avoid bankruptcy over the weekend and helped inject liquidity to seized credit markets by allowing investment banks to borrow direct funds in a historic break with nearly a century of policy.

Now, investors are betting that the Fed will slash its federal funds rate target by a full percentage point, from 3% to 2%. Having already slashed 225 basis points from the target since the credit crisis emerged last summer, some observers are wondering if it can ever restore confidence to financial markets with monetary policy, but Wall Street is clamoring for the Fed to try. ...