NEW YORK (CNN/Money) - Federal Reserve policy makers will cut their target for short-term rate cuts within a month, if two closely watched measures of market expectations are correct.

For one thing, the yield on two-year Treasury bonds fell below the federal funds rate on Monday, something that's happened only four times in the past 13 years -- and each such decline was followed by a Fed rate cut, according to Miller Tabak bond market strategist Tony Crescenzi.

In the other measure of market expectations, the implied yield on the federal funds futures contract, -- a closely watched gauge of what traders are betting about the Fed's monetary policy -- indicates traders think there's nearly a 100-percent chance the Fed will cut rates by 0.25 percentage points before its next policy meeting.

The Fed cuts its target for the fed funds rate, an overnight bank lending rate, to lower the cost of borrowing and encourage economic growth. It raises rates to slow growth and fight inflation.

The Fed cut rates 11 times in 2001 to fight a recession that began in March 2001, but has left rates alone so far this year. In its Sept. 24 policy meeting, however, two voting policy members urged the Fed to cut rates, saying the economy was at risk of further weakness.

Since then, many market participants have been anticipating another Fed rate cut, and they expect it to happen before the Fed's next policy meeting, scheduled for Nov. 6.

The U.S. economy has grown all year, but in fits and starts and hampered by concerns about falling stock prices, corporate malfeasance and a possible war in Iraq. All this uncertainty has kept businesses from planning factory improvements or production increases, and the labor market has been nearly as stagnant as it was in the period following the 1990-91 recession.

The Labor Department is scheduled on Friday to report the national unemployment rate for September and the number of jobs gained or lost in the economy during the month. Economists, on average, expect unemployment to rise to 5.9 percent and that businesses will have hired, in total, a paltry 6,000 new workers, according to Briefing.com.

"I would venture to forecast that if the upcoming payroll report were to post a decline in the vicinity of 200,000 or so, the Fed might lower interest rates as early as this Friday," said Crescenzi of Miller Tabak.