Fed Needs to Cut by Half a Point: Gartman

The Federal Reserve needs to slash interest rates by half a percentage point to show the public that it is taking steps to avert a financial crisis, Dennis Gartman, founder of the Gartman letter, told CNBC on Tuesday.

"I really want to see (a) 50 (basis points cut in short-term rates)… I think it needs to be done, I think you need to send that kind of a signal," Gartman told "Squawk Box."

Savvy investors and experts in the financial markets are aware that this would have little impact on what is going on -- with a crisis of confidence still haunting the market -- and that an expansion in collateral accepted by the Fed is much more important.

But it would be a good signal for the public at large, Gartman added.

"I think people are indeed very concerned… they do in fact know that they have a $100,000 limit on the safety of their banks, and they're concerned about that," he said. (Contd.)

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Inflation data is expected at 8:30 am New York time and analysts surveyed by Briefing.com analysts expect prices to have fallen by 0.1 percent in August from a rise of 0.8 percent in July.

On Monday, the market was pricing in a 67 percent chance of a quarter-point cut, based on closing prices for fed funds futures contracts on the Chicago Board of Trade. Overnight that jumped to 88 percent, Reuters reported.