Special report:
Eyes on the Fed	Full coverage

The Fed's unkindest cut?

Wall St. is certain the Fed will cut rates to ease the pain of the credit crunch. But how will investors react if Bernanke & Co. cut by just a quarter of a point?

NEW YORK (CNNMoney.com) -- The Federal Reserve is going to cut the target on a key short-term interest rate on September 18. There is no mystery about that.

According to futures on the Chicago Board of Trade, the market is pricing in a 100 percent chance of a cut to the federal funds rate, an overnight bank lending rate that heavily impacts how much interest consumers pay on their credit card debt, home equity lines of credit and car loans.

 The fact that the Fed already cut its discount rate, which is what banks pay to borrow money fromthe central bank, in a surprise move on August 17, coupled with remarks from Fed members in thepast few weeks about how closely they are monitoring the mortgage meltdown that is roiling the markets, makes it a virtual lock that Ben Bernanke and Co. will lower the fed funds rate on Tuesday.

Fed can't stop recession

Still, there is a fair amount of intrigue surrounding the September 18 meeting. Specifically, investors are unsure about how much the Fed will lower interest rates.

The Fed cut the discount rate by a half of a percentage point, from 6.25 percent to 5.75 percent, on August 17, leading many market observers to speculate that the Fed would also lower the fed funds rate by a half of a percentage point on September 18.

To that end, as of September 14, investors were factoring in a 58 percent chance that the Fed will cut the fed funds rate by 50 basis points, or half of a percentage point, to 4.75 percent, on Tuesday.

But hopes appear to be diminishing somewhat for a big rate cut. Investors had been pricing in a 74 percent chance of a 50 basis point rate cut on September 12.

Still, what will happen if the central bank only lowers interest rates by a quarter of a percentage point? Fed watchers said it all depends on what the Fed says in its statement.

DOW manage to closed just above +ve....

DOW +17.64 13,442.52 +0.13%

NASDAQ +1.12 2,602.18 +0.04%

S & P 500 +0.30 1,484.25 +0.02%

Technical traders would not sell by being "ganjiong" (jinzhang)...

They will just routinely click the "sell" button once the signs are showing...