Will the Federal Reserve, which meets on Halloween, offer Wall Street, and ultimately home buyers, a treat?

A deepening of the housing downturn and a drop in home values has persuaded many observers that the Fed will cut key interest rates another quarter point when it meets on Wednesday.

"We're entering a period of speculation of whether the Fed will go 25 or 50 basis points,” says Steve Malyon, currency strategist at Scotia Capital in Toronto.

Many believe that treasury bills are supporting the case. "The Fed always follows the 90-day Treasury bill," says Drew Kanaly, chairman of Kanaly Trust Company in Houston, noting three-month bill rates, at 3.82 percent, are nearly a full percentage point below the current target rate.

"They've got 80 basis points they can go," Kanaly says. "We know they can do it. It's rare that fed funds and the 90-day T-bill are that far apart."