Options traders are starting to say the Federal Reserve may cut interest rates three times this year as the housing slump threatens the economy’s growth.

Options on Federal Fund futures at the Chicago Board of Trade show a 24% likelihood the central bank will lower its target rate for overnight loans to 4.5% from the current 5.25%. Just seven weeks ago, options prices suggested no chance of that large a reduction.

Traders in options anticipate lower borrowing costs than economists or futures contracts, the most widely used barometer of Fed policy, amid increasing concerns about mortgage defaults. Futures show rates will fall to 4.75% by year-end and economists expect 5%, according to the median in a Bloomberg survey 73 forecasters from March 1 to March 7.

“The fear is it spills into the economy, it spills into the banking system and creates a credit crisis,” an interest-rate strategist in New York, David Robin, said.

Options, among the cheapest way to bet on rates, may provide a more accurate picture than futures, according to a 2005 study the Federal Reserve Bank of Cleveland.

The Chicago Board of Trade first listed options on the fed funds futures contract in 2003 and began offering contracts in July that allow bets on the Fed’s target rate for loans between banks. The socalled binary options pay $1,000 if an investor bets correctly on the Fed’s interest-rate decision at regularly scheduled meetings. Investors get nothing if they bet incorrectly.