Bay Street economists are now expecting the U.S. Federal Reserve Board to cut its key interest rate by a full 100 basis points tomorrow, as the U.S. central bank struggles to keep financial markets afloat.

In a research note, BMO Capital Markets, says, “We are in the midst of the most pervasive financial crisis in a generation, which has destroyed untold sums of wealth in housing and financial assets and has driven the U.S. economy into recession.”

It adds that the Fed’s primary role right now is as lender of last resort, so it will ignore the effects of its actions on inflation or the moral hazard of bailouts. “Ironically, it was the Fed’s fear of deflation in ’02-’03 that led them to take the fed funds rate down to 1%, arguably the catalyst for the housing bubble,” BMO recalls. “The meltdown in the housing market and its corresponding effects on financial assets will lead the Fed to take the funds rate back down to that level or close to it. Expect the Fed to cut the funds rate 100 basis points tomorrow, if not sooner, from 3% to 2%.”

Global Insight also says it expects the FOMC to vote to slash the federal funds rate by 100 bps, and reduce the discount rate by a further 75 basis points, to 2.50%.

TD Economics is now forecasting 100 bps of easing from the Fed tomorrow, too. At the following two meetings, it’s looking for a further 75 bps and then 50 bps of easing. “This will leave the fed funds rate at an astonishing floor of just 0.75%. This differs from our prior forecast, which had been for a floor of 2.00%,” it says, noting that recent actions from Fed suggest that it, “is clearly flailing around, doing whatever it can to avert an even bigger meltdown than has already occurred.”

Now that it’s calling for much bigger cuts in the U.S., TD has also revised its forecast for the Bank of Canada. It now predicts that the overnight rate will fall to just 2.00% over the next three meetings. “This means that we continue to call for 50 bps cuts at each of the next two decision dates for the Bank (Apr 22 & Jun 10), and that we tack a further 50 bps easing on at the opportunity after that (July 15).”