Given fears of a recession, market participants have upped up the odds the Federal Reserve will slash its key short-term interest rate (known as the Federal funds rate) at the October 29 Federal Open Market Committee Meeting. CBOT Fed funds futures are pricing in odds of 92 percent for a quarter-point cut, to 1.75 percent. However, the market expected a rate cut in September and didn’t get it, so we’ll have to see if policymakers have anything else up their sleeves to shore up the economy if they keep rates steady again in October. Fed Chairman Bernanke seemed to indicate the Fed was ready to cut rates in his testimony to Congress this week, trying to push though the $700 billion financial bailout plan with Treasury Secretary Paulson.

The “intensification” of the financial crisis in recent weeks is curbing Americans’ access to borrowing, making the outlook for consumer spending “sluggish at best,” Bernanke said.

That may be putting it mildly. This morning we had more dour economic news. New-home sales plunged 11.5 percent in August to the lowest level in 17 years, and durable goods orders fell 4.5 percent.