Will the US Federal Reserve cut interest rates again? That’s the 64-billion dollar question the whole financial world wants an answer to. But what the Fed, which meets on Tuesday 30 October and Wednesday 31 October, does is not easy to foresee. The market anticipates another rate cut. Beyond that, it''s a tough call.

The Fed is in a corner. Credit markets remain squeezed, but energy and food costs are soaring, and the dollar is tumbling. The central bank has always tried to walk the tightrope between controlled inflation and fluid markets, but it has been a while since the balance has looked this precarious.

Most investors expect the Fed to decide that the credit crunch is the bigger risk to the economy than lower rates and inflation. US policy makers have repeatedly talked about the need to maintain liquidity in the financial markets.

The question, though, is how long the Fed can maintain this stance. Crude oil prices have soared about 50 per cent this year, and the dollar has sunk more than 8 per cent against the euro and many other global currencies.

The markets, it seems, have already discounted not only a quarter-point rate cut after this week''s Fed meeting, but another after its next meeting on 11 December as well! If the statement that normally accompanies Fed decisions indicates the central bank is loath to make borrowing even cheaper because of inflationary risks, western stock markets could be in for a bumpy time.

A completely baseless rumour on Wednesday 24 October about an ‘emergency Fed decision’ before its scheduled meeting, led to a bounce back from the steep losses the market had suffered that day. That shows exactly how jittery the stock markets have become since the Dow and the S&P hit record highs on 9 October.

Wall Street is deeply worried about how much more the housing market will deteriorate and whether it will drag down the rest of the economy. Investors are also concerned about whether banks and financial institutions are making the right decisions as they scramble to make up for their credit-related losses in the third quarter.

Uncertainty breeds volatility. The Dow Jones index saw several triple-digit swings recently. The Dow ended the week up 2.11 per cent, the Standard & Poor''s 500 index advanced 2.31 per cent, and the Nasdaq composite index rose 2.90 per cent.

Apart from the Fed decision, this week will also bring up data on the state of the economy. Expectations suggest slow growth and tame inflation. The Commerce Department releases a third-quarter gross domestic product report on Wednesday. The Institute for Supply Management reports October manufacturing data on Thursday, the same day that the Labour Department reports on September personal income, spending and inflation figures.

Most important, on Friday the Labour Department releases its October report on the job market. If people are losing jobs, they are apt to scale back spending, and may miss home loan and bill payments. Economists expect payrolls to have risen by a net 85,000 in October, down from September''s net increase of 110,000. They anticipate the unemployment rate to hold steady at 4.7 per cent.