The Federal Reserve's monetary policy panel has started its meeting in Washington DC amid widespread expectations it will lower short-term interest rates to prop up the faltering US economy.
While US interest rates stand at 40-year lows of 1.75 per cent after 11 cuts last year, the Fed is expected to nudge it even lower. Most economists expect the Fed to announce a quarter-point cut in the key federal funds rate.
While the US economy expanded at a 3.1 per cent annual rate in the third quarter, growth is expected to slow sharply in the current quarter. The economy has seen two straight months of job losses and manufacturing, which had been on the path to recovery from last year's recession, is again showing signs of weakness.
Another factor for the Fed to consider is the result of the mid-term Congressional elections. With the Republicans retaking control of the Senate, some analysts believe the likelihood of further tax cuts to revive the economy will increase, giving the Fed less need to consider a larger cut in interest rates.
