The Federal Reserve could make an emergency move and cut the federal funds rate by half a point during trading Monday, investment advisor Marc Faber told CNBC before the bell.
"The markets will open sharply lower, and rightly so," Faber said.
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"Whether there will be a follow up on the downside is not sure, we could have kind of a reversal, simply because central banks will flood the system with liquidity, and I wouldn't rule out, in America, an emergency rate cut, say by half a percent in the trading session and also interventions into the market."
Short term interest rates currently are targeted at 2 percent.
"I would expect markets to temporarily bottom out between now and the middle of October and then have a fairly strong rebound, but of course, no new highs," Faber said.
"The takeover of Bank of America of Merrill Lynch is, of course, an exchange of bad paper for even worse paper," he added.
"In other words, the one-eyed bank buys the blind bank. Bank of America, having already bought a terrible asset, which is Countrywide Financial, is buying another asset about which they have little idea about the value of its securities."
"I'm not so sure than even a rate cut will lead to a strong recovery in financial stocks," he said.
"Personally, I shake my head: why would Bank of America pay a 70 percent premium for Merrill Lynch?"
- Click to Watch Full Faber Interview