Fed Officials Are Expected to Cut Rates. The Question Is How Much.

Policymakers are expected to lower rates for the first time in four years on Wednesday while releasing fresh economic forecasts.

Federal Reserve officials are poised to turn an important corner in their yearslong fight against inflation on Wednesday by cutting interest rates for the first time since early 2020.

It is unclear how big the move will be — investors are betting that it could be either a quarter or a half percentage point. But it will mark the beginning of the end of an era, after more than two years in which central bankers lifted borrowing costs to a two-decade high and then held them there in a bid to slow the economy and bring rapid price increases under control.

Policymakers will also release a fresh set of economic projections on Wednesday, their first since June. Investors will closely watch those estimates for any hint at how quickly interest rates are expected to fall later this year and into next. And Jerome H. Powell, the Fed chair, will hold a news conference after the central bank’s 2 p.m. announcement, which will offer another window into future policy.

Here’s what to watch as the Fed gathers for one of its most consequential meetings in years.

There’s almost no question that the Fed is going to lower interest rates on Wednesday. Even its more inflation-sensitive officials have signaled that it is time to start cuts as they try to balance their two big goals — to keep inflation stable and the job market strong.

For years, the Fed has focused mainly on prices, which were jumping out of control. But inflation has been coming down steadily. The Consumer Price Index measure clocked in at 2.5 percent in August, down from 9.1 percent in the summer of 2022. That’s still a bit quicker than the 2 percent that was normal before the pandemic, but the trend is clearly headed in the right direction.