When the Federal Reserve meets Wednesday, officials are expected to mark the end of an era as they cut interest rates for the first time in four years and chart a course for lower rates over the next two years.
“This is a big meeting,” said former Kansas City Fed president Esther George. “It’s one that’s been foreshadowed since late last year. It’s long been expected.”
The central bank is expected to lower rates by a quarter percentage point to a new range of 5.0%-5.25% from its 23-year high of 5.25% to 5.5% on Wednesday when their policy meeting concludes. The actions will officially mark the termination of the most aggressive inflation-fighting campaign since the 1980s.
Investors’ bets on how deeply the Fed will cut rates for the first time have been fluctuating widely. As of early Monday morning, traders were pricing in an almost 60% chance of a reduction of 50 basis points, versus 40% for 25 basis points. The odds were split 50-50 on Friday, compared with an 85% backing for the smaller cut a week or so ago.
Read more: What the Fed rate decision means for bank accounts, CDs, loans, and credit cards
The Fed is set to cut rates roughly six weeks before the presidential election, something Republican presidential candidate and former President Trump and other Republicans have said the central bank should refrain from until after the election.
The rate cut will mark the first in a series of cuts, as the central bank’s new era of easy money is expected to last through 2025 and 2026. That shift will ripple through the US economy by making it cheaper for Americans to borrow what they need to buy houses, cars, and credit card purchases.