The Federal Reserve is expected to cut interest rates Wednesday, and you'd better be happy about it.

        Another half-point off the federal funds rate — a target rate for overnight loans among banks — would mean the Fed has cut rates a full percentage point in a month. That hasn't happened since 1982, and it's out of character for the normally cautious Fed chairman, Alan Greenspan.

        The move, widely expected among economists and investors, is a sign of the Fed's concern over the economy and how consumers feel about it. Manufacturing is hurting. The Fed's own report on December industrial production showed factories cut output for the third month in a row.

        “The numbers were terrible,” said Gordon Richards, chief economist for the National Association of Manufacturers in Washington, D.C. “In December, the only thing that rose was computers and peripherals, and utility output. Everything else declined.”

        He said the Fed raised interest rates a half point in May because it saw the economy accelerating, and feared inflation. But he said the Fed didn't realize manufacturers were building up inventories and it ignored other signs of the economy slowing.

        “Now we're witnessing a payback,” he said. Manufacturers are cutting production, waiting for their warehouses to empty. High energy prices and the Fed's own interest rate increases — six moves for 1.75 points from June 1999 to May 2000 — are also slowing the economy.

        And the Fed is concerned that consumers may be get ting too much bad news, said Lynn Reaser, chief economist for Bank of America Investment Management. “With announcements of corporate layoffs, consumer confidence — which is already fragile — could weaken further and jeopardize consumer spending,” she said.

        If consumers cut back, then factories cut back more, igniting a downward spiral, she said. There's no guarantee it will ease consumers' minds, but “the bigger risk is that they would fail to move aggressively, and a weak economy would fall into a full recession,” she said.

        Also, Mr. Greenspan will give his annual report on monetary policy to the Senate Banking Committee in February. James Coons, chief economist at Huntington Bank in Columbus, said Mr. Greenspan doesn't want to face questions about whether the Fed is doing enough. “I think there is great concern(the Fed may) get blamed for a serious downturn,” he said.

        Whether the Fed needs to cut more isn't clear. Mr. Coons said there are already signs that retail sales are improving after a disappointing Christmas, and all the major stock market indexes are up in January. If the signs of weakening abate, the Fed might not feel the need to cut rates again.

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