Fed seen cutting U.S. rates as consumer hopes swoon

WASHINGTON (Reuters) - The U.S. Federal Reserve began a two-day meeting on Tuesday that was expected to end with a small interest rate cut that could be the last in a string of reductions dating to mid-September.

The U.S. central bank opened its policy-setting meeting at 2 p.m. (1800 GMT), a Fed official said. A decision on rates is expected to be announced about 2:15 p.m. on Wednesday.

Financial markets widely expect the Fed to lower benchmark overnight rates by a quarter-percentage point to 2 percent, which would the lowest since December 2004, and offer a hint the rate cutting may be at an end. Interest rate futures prices implied a small probability the Fed could leave rates unchanged.

The meeting began after fresh reminders of the deep trouble the economy faces from a combination of fading growth and soaring prices for energy and commodities that is pushing supermarket food prices to new highs and causing growing unease among both consumers and Fed officials.

The Conference Board said at mid-morning that its Consumer Confidence Index slumped to 62.3 in April from a revised 65.9 in March. At the same time, new data from the closely watched Standard & Poor's/Case Schiller home price index showed a continued plunge in prices of existing homes in February.

Some 17 of 20 measured regions had record annual falls in home prices. "There is no sign of a bottom in the numbers," said David Blitzer, chairman of S&P's index committee.

In a sign of rising distress, real estate data firm RealtyTrac said on Tuesday that U.S. home foreclosure filings jumped 23 percent in the first three months of the year from the last quarter of 2007. Foreclosure filings were more than double that of a year earlier.

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