FED MAY BE NEAR CUTTING RATES.

Byline: Martin Crutsinger Associated Press 

Federal Reserve policy makers are expected to cut interest rates for the first time in nearly three years today, acting on Chairman Alan Greenspan's alarm about a deteriorating world economy.

The question, private economists said Monday, is how much success any cut would have in containing a financial crisis that so far has proven unstoppable and now threatens more countries, including Brazil.

A reduction in interest rates by the Federal Reserve would boost the U.S. economy by making it cheaper for American consumers and businesses to obtain loans for big-ticket items. Stronger U.S. demand in turn would help foreign countries that ship goods to the United States.

``A Fed rate cut will help undergird a deteriorating global economic situation. But it isn't a magic bullet,'' said Sung Won Sohn, chief economist at Norwest Corp. in Minneapolis.

Emphasizing the urgency, international authorities were busy working behind the scenes on a rescue package for Brazil. The largest economy in South America is being hit by the same panicked rush to the exits by foreign investors that has already flattened many Asian countries and Russia.

Officials in Washington said discussions were centering on emergency loans of around $30 billion assembled by the International Monetary Fund with contributions from the World Bank, the Inter-American Development Bank and individual countries, including the United States.

Separately, many hope a Fed rate cut would serve as a badly needed confidence booster, demonstrating that U.S. authorities will do whatever is necessary to keep the American economy - the world's largest - growing so it can serve as a market of last resort for other troubled countries.

THE FACTS

The federal funds rate, the interest that commercial banks charge each other on overnight loans, has been at 5.5 percent since March 25, 1997. When the Federal Reserve lowers its target for the funds rate, it has an impact on a variety of consumer and business loans.

CONSUMERS: Rates for many types of consumer credit, including personal loans, credit card balances, home equity loans and adjustable-rate mortgages, will fall. Many of these loans are tied to banks' prime lending rates, which move in lock step with changes in the federal funds rate. The prime rate has been at 8.5 percent since March 25, 1997, the date of the last change in the federal funds rate.

BUSINESSES: The vast majority of small-business loans are at adjustable rates that rise and fall with changes in the prime rate. In recent years, banks have matched the change in the federal funds rate with an identical change in their prime lending rate often on the same day as the Fed's announcement.

- Associated Press

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Box: The facts (see text)