Report: Rate cut seen, but not till September

NEW YORK (CNNMoney.com) -- The Federal Reserve will cut its key interest rate, probably by a quarter percentage point, but will wait until next month to do so, a news report citing a survey of economists said Wednesday.

USA Today said that a majority of 37 economists surveyed Monday and Tuesday said they expected the central bank will cut its fed funds rate, which affects rates on consumer loans, by a quarter point next month. Some on Wall Street have been clamoring for more aggressive action, calling for a rate cut of a half a point before the Fed's next meeting on Sept. 18.

In the USA Today survey, however, nearly a third of the economists, 11 out of 37, said they expect the Fed to hold rates steady through the end of the year.

Most of the economists surveyed have cut their growth forecasts for the second half of the year, the paper said, citing prolonged troubles in the housing market. But they also said they expect the country to avoid a recession, forecasting a 25 percent chance of a downturn this year and a 20 percent chance next year, the report said.

Separately, the Wall Street Journal reported that many on Wall Street believe the Fed will still have to cut interest rates sharply, perhaps starting in the next week or two, although the paper also said Fed officials would prefer to wait until their Sept. 18 meeting.

Last Friday the Fed tried to calm financial markets by cutting its little used discount rate - the rate the central bank charges to lend directly to banks - by a half point.

Many investors are betting the Fed will have to cut the more closely watched fed funds rate, which has a bigger impact on the economy than the discount rate.