Sources have told us that we should expect Microsoft to respond to Sony’s slashing of the PlayStation 3 by $50. According to the whispers that we are hearing, Microsoft is planning to slash the price of their console by $50 as well.

The price cut is said to be a lock for the 4GB Xbox 360 Kinect bundle, which will see its price drop to $249 from $299. It is unknown if Microsoft will cut the price on the 250GB hard drive system (or what used to be call the Elite bundle); but our sources tell us that instead Microsoft may try in the near term to keep the price at $299 and bundle the 5 titles with it that we recently told you about.

A retail contact that we spoke with today tells us that in addition to the $249 4GB model with Kinect, he expects a $50 price cut on the 250GB hard drive model with Kinect, which will bring that bundle down to $349 from $399. “I keep hearing that they are going to drop the price of the $199 4G core system to $149; but I am not going to believe it till I actually see it in writing, and if that cut comes we should not expect to see it till Black Friday,” one industry distribution source tells us.

With Microsoft continuing to win the sales battle with Sony, it is hard to believe that Microsoft will want to give that up this holiday season, as this holiday season is seen as pivotal for both companies to maximize the number of consoles they move this holiday season. With new potential consoles on the horizon in the near future, this will be the best chance to maximize all of the sales potential this holiday season.