Prime lending rates have fallen one percentage point since June, including a half-point cut Nov. 2.
Some had expected a 50-point cut, to 4.0%, but that now seems improbable given Friday's jobs data.
We now expect a 25-basis-point cut in the Federal funds rate and discount rate on Dec. 11.
Federal funds futures were indicating expectations for a 75 basis point cut from the Fed March 18.
Since then, futures prices have been predicting a 50 basis-point cut in short-term interest rates by April.
MPC's half-point cut in interest rates last month, is now calling for a repeat performance on December 10th.
Two of its nine members already voted for a quarter-point cut in March.
In effect, Mr Paulson engineered the equivalent of a half-point cut in interest rates targeted at the mortgage market.
Wall Street, which had been hoping for a sixth half-point cut, was disappointed.
Making it worse: Financial markets had widely anticipated the quarter-point cut, taking away much of its impact on juicing stocks.
Before this week's liquidity actions, financial markets expected another three-quarter-point cut at the Fed's next rate-setting meeting on March 18th.
Trading in the futures markets shows expectations of another 25- to 50-point cut then to levels not seen in 50 years.
The cut Wednesday comes less than one month after another half-point cut, that time coordinated with central banks around the globe.
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The ECB left rates on hold, some were expecting a quarter-point cut.
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But a decision by the Federal Reserve to make a quarter-point cut, say, would do little to help Russia, Brazil or Thailand.
Last month, the BoE joined forces with the U.S. Federal Reserve and European Central Bank to make an emergency half-point cut in interest rates.
When the bank ironed another wrinkle out of its data in May, it used the correction to justify a quarter-point cut in interest rates.
"If the trends indicated by this survey continue to weaken, a quarter-point cut would be the right medicine sooner rather than later, " he said.
His half-point cut in short-term interest rates was designed to avoid a recession, but it may have bought him only a postponement of the inevitable.
Having delivered a half-point cut rather than a quarter, Mr Bernanke is not yet free of the suspicion that he will follow Mr Greenspan's path.
The Bank of England has delivered a stunning 150-basis-point cut to interest rates, as the British economy seems headed toward a potentially long and painful recession.
The U.K.'s central bank cut its key interest rate to 3.0%, from 4.5%, on Thursday, far exceeding many economists' expectations for a 75- or 100-basis-point cut.
Richard DeKaser, chief economist at National City, predicted a 50-point cut and thinks another 25-point cut will come in October, the next time the Open Market Committee meets.
Bernanke also said Operation Twist equates a 50 basis point cut in the Fed funds rate, adding he expected an additional 20 basis point fall in lending costs.
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Many Fed watchers had expected a less aggressive quarter-point cut.
He calculates that a 10% drop in the euro has the same impact on growth as a one percentage-point cut in interest rates (assuming that long-term rates also adjust).
The Federal Reserve said Friday it has approved a half-percentage point cut in the discount rate - a dramatic move aimed at calming markets roiled by a widening credit crisis.
This created the genuine possibility that this temporary 2.0 percentage point cut in the 6.2% Social Security tax normally paid by employees would expire at the end of this year.
FORBES: Don't Extend The Ill-Conceived, Evil Payroll Tax Cut
Half of City economists expect a quarter-point cut by the end of 2008, according to a Bloomberg News poll on August 22nd, compared with a quarter of them on August 8th.
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