Efforts by the Federal Reserve to restore order to financial markets are about to enter a new and potentially dangerous phase.

The Fed is expected to cut US interest rates by 75 basis points to 2.25 per cent, following its recent, more aggressive policy moves to improve liquidity conditions. There re-mains a clear possibility that interest rates will only be reduced by 50 basis points as policymakers attempt to evaluate the impact of their earlier efforts to restore confidence to financial markets.