The Fed is likely to soon cut a key interest rate to 1 percent, says global investing guru Mark Mobius.
On Tuesday, the U.S. central bank held steady on the federal funds rate, at 2 percent. It had reached 2 percent by the end of April, down from a recent high of 5.25 percent in mid September 2007.
As inflationary pressures subside, however, the Fed will have less reason to now raise the benchmark lending rate. In fact, Mobius tells Bloomberg News, it will instead cut that rate to boost the flagging U.S. economy.
Part of the reason is oil, falling fast as U.S. and global economies cut back, says the executive chairman of Templeton Asset Management. Mobius manages $40 billion for Templeton.
Oil has been trading well under $120 a barrel, down from a high of $147 just a few weeks ago.
"With oil prices beginning to soften, there may be a chance for them to give a boost to the economy by lowering rates again,'' Mobius says. "That's still in the cards, but no one really knows.''
"There's a need for stimulus,'' Mobius predicts, contrary what seems to have been a consensus among Fed voting members that inflation would mean rate hikes by year-end.
"Probably a rate of 1 percent would be just right.''
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