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Washingon Post reported that amid emerging evidences of possible recession, Fed Chief Ben S. Bernanke in his first public comments of 2008 said that "additional policy easing may well be necessary." Which according to the paper can be contrued as an indication of possibility of a cut in short term interest rate. Read the article

Fed Cuts Key Rate Quarter Point (The Washington Post 12th Dec 2007) The Federal Reserve cut a short-term interest rate yesterday to try to keep problems in the housing and mortgage markets from dragging the nation into recession, but Wall Street judged the move as too timid and financial markets tanked. The Fed's policymaking committee cut the federal funds rate, at which banks make overnight loans to each other, by a quarter percentage point, to 4.25 percent. The third rate cut this year is likely to trickle through to interest rates on credit cards, business loans and some adjustable-rate mortgages. But investors had hoped for a half-point cut, or at least a clearer signal that the central bank will cut rates again in the future, and stocks plummeted. The Dow Jones industrial average closed down 294 points for the day, a 2.1 percent drop. ..more Credit Crisis Prompts Fed to Roll Back Rates Again (The New York Times 12th Dec 2007) The Federal Reserve cut its benchmark short-term ...

Likely Fed rate cut buoys market mood (Live mint.com 10th Dec 2007) Investors on Dalal Street are betting that the US Federal Reserve (Fed) will announce a further cut in interest rates when it meets this week, and have started accumulating some stocks because such a reduction could have a positive impact on the market. “Some of the domestic institutional investors such as mutual funds and insurance companies expect a strong rally in the wake of a Fed rate cut,” says Anita Gandhi, head of institutional business at Arihant Capital Markets Ltd, an institutional brokerage.