Aug. 5 (Bloomberg) -- The Federal Reserve should cut its benchmark interest rate to 1 percent to boost the economy as falling oil prices reduce the threat of inflation, investor Mark Mobius said.

``With oil prices beginning to soften, there may be a chance for them to give a boost to the economy by lowering rates again,'' Mobius, 71, who oversees about $40 billion in emerging- market stocks as executive chairman at Templeton Asset Management Ltd. in Singapore, said in an interview on Bloomberg Television. ``That's still in the cards, but no one really knows.''

Mobius also said valuations for equities in Turkey and South Africa are ``very attractive,'' and added that he's ``very bullish'' on shares of Brazilian banks.

Equities tumbled around the world this year as the deepest U.S. housing slump since the Great Depression and more than $480 billion of credit losses and asset writedowns at banks sent the largest economy toward its first recession since 2001. The MSCI World Index of stocks in 23 developed nations and the MSCI Emerging Markets Index of 25 developing countries have both experienced bear-market declines of more than 20 percent from their 2007 highs.

Fed's Decision

The Fed's rate-setting Federal Open Market Committee kept its target for the overnight lending rate between banks at 2 percent today. The central bank cut it seven times since September to restore confidence in debt markets and bolster the economy. Since the June meeting, crude oil rose to a record $147.27 a barrel before dropping almost 20 percent.

``Although downside risks to growth remain, the upside risks to inflation are also of significant concern to the committee,'' the FOMC said in a statement today in Washington.

In response to the bursting of the Internet and technology bubble and the Sept. 11 terrorist attacks, former Fed Chairman Alan Greenspan lowered the central bank's key rate in 2001 to 1.75 percent from 6.5 percent, then reduced it more in 2003 to 1 percent, a 45-year low. Some Fed critics say rates were too low for too long, encouraging the easy credit that helped inflate a housing bubble that's now burning investors.

``There's a need for stimulus,'' said Mobius, whose $5 billion Templeton Developing Markets Trust has outperformed only 11 percent of its peers during the past five years. ``Probably a rate of 1 percent would be just right.''

Best Performance

Turkey's ISE National 100 Index is the world's best- performing equity benchmark over the past month among 88 indexes tracked by Bloomberg. The gauge jumped 23 percent as concern eased that Prime Minister Recep Tayyip Erdogan's government may be ousted. Turkey's Constitutional Court rejected last week a call by prosecutors to shut down Erdogan's party, which has presided over record economic growth and foreign investment.

South Africa's FTSE/JSE Africa All Shares Index slipped into a bear market last week for the second time this year as falling metals prices dragged down mining companies including BHP Billiton Ltd. and Anglo American Plc. The retreat marks the seventh decline of at least 20 percent from a recent peak for the FTSE/JSE index since 1995, according to data compiled by Birinyi Associates Inc., a Westport, Connecticut-based research and money management firm founded by Laszlo Birinyi.

``More and more people are beginning to see that these markets are very cheap,'' Mobius said. ``The companies are well managed and well run.''

Brazil's Bovespa index, which gets almost half its value from producers of energy and raw materials, tumbled 24 percent since a May record after the central bank increased interest rates, the current account deficit widened to an all-time high and economic growth slowed. The sell-off dislodged the Bovespa as the best-performing benchmark among the world's 20 biggest equity markets this year, according to Bloomberg and Birinyi data.

``The economy is very vibrant there, and the banks are very well run,'' Mobius said.

To contact the reporters on this story: Michael Patterson in London at mpatterson10@bloomberg.net; Matthew Miller in New York at mtmiller@bloomberg.net.

Last Updated: August 5, 2008 14:17 EDT