Another lending rate cut expected by Federal Reserve

Many economists believe the U.S. Federal Reserve will cut interest rates in half on Tuesday to just 0.5 per cent to spur the economy.

With the U.S. economy facing its toughest conditions since the 1930s, the Fed's monetary policy committee opened a two-day meeting on Monday to consider its response.

Some economists want the Fed to go beyond a half percentage point cut and to lower borrowing costs by a more aggressive 0.75 of a percentage point. A cut of that size would reduce borrowing costs to the lowest point since 1954.

Tight credit markets have led banks to hang on to their money, while U.S. consumers have been pessimistic about their jobs and have seen their investments battered.

Moves by the Fed to lower interest rates are intended to get consumers and companies to spend more, although that has not met with much success yet in the U.S.

Last week, the Bank of Canada cut its overnight rate by three-quarters of a percentage point, bringing it down to 1.50 per cent, a 50-year low.

"While Canada's economy evolved largely as expected during the summer and early autumn, it is now entering a recession as a result of the weakness in global economic activity," the Canadian central bank said.