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The Federal Reserve is considering measures to make liquidity more readily available to financial institutions. Analysts close to the Fed believe it is considering a cut in the discount rate, at which it lends directly to banks, and steps to reduce the stigma associated with such borrowing. The Fed could announce plans to cut the discount rate by 25bp to 4.75%. That would halve the interest penalty on discount window borrowing compared to the main, Fed funds, rate of 4.5%. The reduction of the discount rate penalty could come before the next FOMC meeting on Dec 11 if credit market conditions remain stressed. Alternatively, the Fed may cut the discount rate by an extra 25bp over and above any reduction in the Fed funds rate at that meeting, the analysts said.