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CNBC Survey: Fed to Cut Quarter-Point Today

A CNBC Trillion Dollar Survey of the nation's top money managers, investment strategists and professional economists shows they overwhelmingly expect the Federal Reserve to lower its federal funds target rate by a quarter-point, to 5%, today.

There's less agreement, however, on what Ben Bernanke and company will do with the discount rate.

The fed funds rate, which is what banks charge each other for overnight loans, heavily influences other interest rates. The discount rate, which is what the Fed charges banks for short-term loans, is less widely watched.

While 86% of those answering our survey expect a quarter-point fed funds move, just 42% expect a half-point drop in the discount rate with another 38% forecasting a quarter-point drop. Almost one in five say they think the discount rate won't be changed at all.

There's also less agreement on what the Fed should do with the fed funds rate. Just over half favor the widely-expected quarter-point cut, but a third say the Fed should go for a half-point drop and 14% advocate no change right now.

The Trillion Dollar Survey shows the six-month forecast for the Fed Funds rate is dropping. Today's survey predicts the key overnight-lending rate will be at 4.59% in six months. That's down from 5.08% in the early-August survey.

Several of those answering the survey fear that whatever the Fed does, it won't be able to help alleviate the nation's credit troubles. Oppenheimer's Michael Metz said: "A cut in rates here does nothing to alleviate the fundamental problem which is ongoing deflation in residential and commercial real estate."

Scott Anderson at Wells Fargo said: "The markets are expecting a lot from the Fed this week, perhaps anticipating a miracle. Unfortunately, the Fed's response is likely to come well short of these expectations. The Fed's ability to cure what ails the economy and markets is quite limited over the near-term."

The survey also shows increased fears of a U.S. recession over the next 12 months. It puts the chances of a downturn at 30.74%, up from 24.75% just over a month ago.

And former Federal Reserve Chairman Alan Greenspan gets 40% of the blame for the current troubles in the credit/mortgage markets, in part because he kept interest rates too low for too long.

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